Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1 Gerber Childrenswear, Inc. 131 744K
2: EX-4.2 Credit Agreement 108 427K
3: EX-10.1 Stock Purchase Agreement 51 215K
11: EX-10.10 Subordination and Interceditor Agreement 17 68K
12: EX-10.11 Junior Subordinated Note 25 100K
13: EX-10.13 License Agreement 28 91K
14: EX-10.14 License Agreement 31 73K
15: EX-10.15 Trademark License Agreement 33 127K
16: EX-10.16 Lease Agreement 7 31K
17: EX-10.17 Lease Agreement 6 28K
18: EX-10.18 Lease Agreement 6 28K
19: EX-10.19 Lease Agreement 11 37K
4: EX-10.2 Form of Executive Stock Purchase Agreement 21 90K
20: EX-10.20 Lease Agreement 40 120K
21: EX-10.21 Severance Agreement 2 14K
5: EX-10.3 Form of Manager Securities Purchase Agreement 17 69K
6: EX-10.4 Securities Purchase Agreement 13 60K
7: EX-10.5 Form of Director Stock Purchase Agreement 12 44K
8: EX-10.7 Stock Purchase Agreement 54 224K
9: EX-10.8 Share Purchase Agreement 52 242K
10: EX-10.9 Amended and Restated Credit Agreement 54 238K
22: EX-21.1 Subsidiaries of the Registrant 1 8K
23: EX-23.1 Consent of Ernst & Young LLP 1 10K
24: EX-23.2 Consent of Jc Holland & Co Psc 1 8K
25: EX-23.3 Consent Price Waterhouse 1 8K
26: EX-27.1 Financial Data Schedule 1 10K
Exhibit 10.1
STOCK PURCHASE AGREEMENT
Between
GERBER PRODUCTS COMPANY
and
GCIH, INC.
dated as of
December 14, 1995
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF STOCK.................................... 1
1.1 Transfer of Stock....................................... 1
1.2 Consideration........................................... 1
1.3 The Closing............................................. 1
1.4 Purchase Price Adjustment............................... 3
1.5 Further Assurances...................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER...................... 7
2.1 Corporate Organization.................................. 7
2.2 Capital Stock........................................... 8
2.3 Ownership of Stock...................................... 8
2.4 Authorization, Etc...................................... 9
2.5 Balance Sheet and Income Statement...................... 9
2.6 No Approvals or Conflicts............................... 10
2.7 Compliance with Law; Governmental Authorizations........ 11
2.8 Litigation.............................................. 11
2.9 Title to Assets......................................... 11
2.10 Absence of Certain Changes.............................. 12
2.11 Taxes................................................... 13
2.12 Employee Benefits....................................... 15
2.13 Labor Relations......................................... 17
2.14 Patents, Trademarks, Trade Names, Etc................... 17
2.15 Contracts............................................... 18
2.16 Environmental Matters................................... 19
2.17 Insurance............................................... 20
2.18 Title to Real Estate Properties......................... 21
2.19 Affiliate Transactions.................................. 22
2.20 No Brokers' or Other Fees............................... 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER................... 23
3.1 Organization............................................ 23
3.2 Authorization, Etc...................................... 23
3.3 No Approvals or Conflicts............................... 23
3.4 Acquisition for Investment.............................. 24
3.5 Financing............................................... 24
3.6 Hart-Scott-Rodino Act................................... 24
3.7 No Brokers' or Other Fees............................... 25
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Page
ARTICLE IV CONDITIONS TO SELLER'S OBLIGATIONS............................ 25
4.1 Representations and Warranties.......................... 25
4.2 Performance............................................. 25
4.3 Officer's Certificate................................... 25
4.4 HSR Act................................................. 25
4.5 Injunctions............................................. 25
4.6 Consents................................................ 26
4.7 License and Distributor Agreement....................... 26
4.8 Release of Letters of Credit............................ 26
ARTICLE V CONDITIONS TO PURCHASER'S OBLIGATIONS......................... 26
5.1 Representations and Warranties.......................... 26
5.2 Performance............................................. 26
5.3 Officer's Certificate................................... 26
5.4 Resignation of Directors................................ 27
5.5 HSR Act................................................. 27
5.6 Injunctions............................................. 27
5.7 Consents................................................ 27
5.8 Ancillary Agreements.................................... 27
5.9 Title Insurance......................................... 27
5.10 Surveys................................................. 28
ARTICLE VI COVENANTS AND AGREEMENTS...................................... 28
6.1 Conduct of Business by Seller............................ 28
6.2 Access to Books and Records; Cooperation................. 29
6.3 Filings and Consents..................................... 30
6.4 Tax Matters.............................................. 30
6.5 WARN Act................................................. 36
6.6 Supplements to Disclosure Schedule....................... 37
6.7 Covenant to Satisfy Conditions........................... 37
6.8 Use of "Gerber" Name..................................... 37
6.9 Intercompany Obligations................................. 37
6.10 Employment Benefit Provisions............................ 38
6.11 Ancillary Agreements..................................... 40
6.12 Covenant Not to Compete.................................. 40
6.13 Release of Guaranty and Revocation of Powers of Attorney. 42
6.14 Liabilities Retained by Seller........................... 42
6.15 Director and Officer Liability and Indemnification....... 43
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6.16 Exclusivity.............................................. 43
6.17 Financing................................................ 43
ARTICLE VII TERMINATION................................................... 44
7.1 Termination.............................................. 44
7.2 Procedure and Effect of Termination...................... 44
ARTICLE VIII INDEMNIFICATION............................................... 45
8.1 Indemnification.......................................... 45
8.2 Environmental Indemnification ........................... 49
ARTICLE IX MISCELLANEOUS................................................. 50
9.1 Fees and Expenses........................................ 50
9.2 Governing Law............................................ 50
9.3 Amendment................................................ 50
9.4 No Assignment............................................ 50
9.5 Waiver................................................... 51
9.6 Notices.................................................. 51
9.7 Complete Agreement....................................... 53
9.8 Counterparts............................................. 53
9.9 Publicity................................................ 53
9.10 Headings................................................. 53
9.11 Knowledge................................................ 53
9.12 Severability............................................. 53
9.13 Third Parties............................................ 54
9.14 Specific Performance..................................... 54
9.15 Dispute Resolution....................................... 54
9.16 Confidentiality of Company Information................... 55
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of
December 14, 1995, is entered into by and between Gerber Products Company, a
Michigan corporation ("Seller"), and GCIH, Inc., a Delaware corporation
("Purchaser").
WHEREAS, Seller is the beneficial owner of record of all of the
outstanding shares of common stock, par value $100 per share (the "Shares"), of
Gerber Childrenswear, Inc., a Delaware corporation (the "Company"); and
WHEREAS, Purchaser desires to purchase and Seller desires to sell
the Shares upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1. Transfer of Stock. On the Closing Date (as defined in Section 1.3
below) and subject to the terms and conditions set forth in this Agreement,
Seller will sell, assign, transfer and deliver to Purchaser the Shares, free and
clear of all options, pledges, security interests, voting trust or similar
arrangements, liens, charges or other encumbrances or restrictions on voting or
transfer ("Encumbrances"), other than the restrictions imposed by Federal and
state securities laws.
2. Consideration. On the Closing Date and subject to the terms and
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein and in
consideration of the sale, assignment, transfer and delivery of the Shares,
Purchaser will pay to Seller the amount set forth in Section 1.3(b)(i) hereof
(the "Purchase Price").
3. The Closing. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place at such place as may reasonably
be designated by Purchaser at 9:00 a.m., local time, on January 12, 1996, or as
soon thereafter as practicable following the satisfaction or waiver of all of
the conditions set forth in Articles IV and V hereof (the "Closing Date"), or at
such other place and time as may be agreed upon by Seller and Purchaser.
Notwithstanding the fact that all of the conditions to Closing set forth in
Article IV or V hereof have been satisfied or waived by Purchaser, Purchaser may
unilaterally extend the Closing Date beyond January 12, 1996 if and for so long
as Purchaser is continuing in good faith to use its reasonable best efforts to
consummate the financing set forth in the Commitment Letters (as defined in
Section 3.5 and beyond January 19, 1996 only if on or before January 19, 1996,
the stockholders of Purchaser shall have paid the Purchaser the full amount of
the Equity Investment (as defined in Section 6.17) provided, that in no event
shall the Closing Date be extended pursuant to this sentence beyond January 31,
1996.
(a) Deliveries by Seller. At or prior to the Closing, Seller shall
deliver or cause to be delivered to Purchaser the following:
(i) certificates evidencing the Shares, which certificates shall
be properly endorsed for transfer or accompanied by duly
executed stock powers, in either case executed in blank or in
favor of Purchaser or its assigns and otherwise in a form
acceptable for transfer on the books of the Company; and
(ii) all other previously undelivered documents required to be
delivered by Seller to Purchaser at or prior to the Closing
Date in connection with the transactions contemplated hereby,
including the documents described in Article V hereof.
(b) Deliveries by Purchaser. At or prior to the Closing, Purchaser shall
deliver or cause to be delivered to Seller the following:
(i) $64 million by wire transfer of immediately available funds to
an account designated by Seller, less the amount (if any) of
principal, accrued interest, prepayment fees or penalties or
similar charges with respect to any indebtedness for borrowed
money (including any capitalized lease obligations as
determined pursuant to generally-accepted accounting
principles ("GAAP")), of the Company and the Subsidiaries (as
defined below) outstanding as of the Closing on the Closing
Date;
(ii) an executed promissory note of Purchaser and payable to Seller
and having the terms set forth on Exhibit 1.3(b)(ii) attached
hereto (the "Note") in the principal amount of $10 million and
otherwise in form and substance reasonably acceptable to
Seller and Purchaser; and
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(iii) all other previously undelivered documents required to be
delivered by Purchaser to Seller at or prior to the Closing
Date in connection with the transactions contemplated hereby.
(c) All instruments and documents executed and delivered to Purchaser
pursuant hereto shall be in form and substance, and shall be
executed in a manner reasonably satisfactory to Purchaser. All
instruments and documents executed and delivered to Seller pursuant
hereto shall be in form and substance, and shall be executed in a
manner reasonably satisfactory to Seller.
(d) Seller agrees and covenants that the cash and cash equivalents of
the Company and the Subsidiaries on hand as of the Closing shall not
be less than $300,000 in the aggregate.
4. Purchase Price Adjustment. (a) As soon as practicable, but in no
event later than 60 days following the Closing Date (as hereinafter defined),
Purchaser shall prepare a Statement of Adjusted Working Capital of the Company
and the Subsidiaries (as defined below) as of the open of business on the
Closing Date (including the notes thereto, the "Closing Date Statement"). The
Closing Date Statement shall present the net amount of the Company's
consolidated current assets less the Company's consolidated current liabilities
(in each case excluding (i) any amounts payable to or receivable from Seller or
any of its Affiliates (as defined in Section 2.3 hereof) other than the Company
and its Subsidiaries that do not remain outstanding after the Closing, (ii)
accrued state and federal income taxes, (iii) the amount, if any, by which net
inventory included in such calculation exceeds $64 million in the aggregate and
(iv) the amount by which any accruals with respect to health and short term
disability benefits provided to employees of the Company included in such
calculation exceeds $419,595 in the aggregate as of the open of business on the
Closing Date (the "Net Working Capital Amount") and shall be prepared with
respect to such items on a basis consistent with the Balance Sheet (as defined
in Section 2.5) and in accordance with GAAP (subject to the adjustments and
exceptions referred to in Section 2.5 of the Disclosure Schedule other than Item
9 thereof); provided that all known arithmetic errors shall be taken into
account in the preparation of the Closing Date Statement. With respect to the
preparation of the Closing Date Statement, no change in accounting principles
shall be made from those utilized in preparing the Balance Sheet including,
without limitation, with respect to the nature of accounts, or the determination
of the level of reserves or level of accruals. For purposes of the preceding
sentence, "changes in accounting principles" includes all changes in accounting
principles, policies, practices, procedures or methodologies with respect to
financial statements, their classification or their display, as well as all
changes in practices, methods, conventions or assumptions (unless required by
objective changes in underlying events) utilized in making accounting estimates.
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(b) During the preparation of the Closing Date Statement and the period
of any dispute within the contemplation of this Section 1.4,
Purchaser shall cause the Company to (i) provide Seller and Seller's
authorized representatives with access to the books, records,
facilities, employees and accountants of the Company, (ii) provide
Seller as promptly as practicable after the Closing Date (but in no
event later than 15 days after the Closing Date) with normal
month-end closing financial information for the period ending on the
Closing Date and (iii) cooperate with Seller and Seller's authorized
representatives, including the provision on a timely basis of all
information necessary or useful in connection with Seller's review
of the Closing Date Statement.
(c) Purchaser shall deliver a copy of the Closing Date Statement,
together with the work papers used in the preparation thereof, to
Seller promptly after it has been prepared and in no event later
than 60 days after the Closing Date. After receipt of the Closing
Date Statement, Seller shall have 30 days to review the Closing Date
Statement, together with the work papers used in the preparation
thereof. Unless Seller delivers written notice to Purchaser on or
prior to the 30th day after Seller's receipt of the Closing Date
Statement specifying all disputed items and the basis therefor,
Seller shall be deemed to have accepted and agreed to the Closing
Date Statement. If Seller so notifies Purchaser of its objection to
the Closing Date Statement on the grounds that such statement was
not prepared on a basis consistent with the Balance Sheet, Seller
and Purchaser shall, within 30 days following such notice (the
"Resolution Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final,
binding and conclusive. If following resolution of any disputed
amounts there do not remain in dispute amounts the aggregate net
effect of which exceeds $100,000, then all amounts remaining in
dispute shall be deemed to have been resolved in favor of the
Closing Date Statement delivered by Purchaser to Seller.
(d) If, at the conclusion of the Resolution Period, the aggregate net
effect of all amounts remaining in dispute exceeds $100,000, then
all amounts remaining in dispute shall be submitted to KPMG Peat
Marwick (the "Neutral Auditors"). In the event that KPMG Peat
Marwick is unwilling to serve as the Neutral Auditor hereunder and
Purchaser and Seller are unable to agree on a substitute therefor,
Purchaser or Seller may request the American Arbitration Association
to appoint a nationally recognized accounting firm to act as Neutral
Auditor hereunder who shall not have had a material relationship
with Seller or Purchaser or any of their Affiliates within the past
two years. Each party agrees to execute, if requested by the Neutral
Auditors, a reasonable engagement letter. All fees and expenses
relating to the work, if any, to be performed by the Neutral
Auditors shall be borne equally by Seller and Purchaser. The Neutral
Auditors shall act as an arbitrator to determine, based solely
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on presentations by Seller and Purchaser, and not by independent
review, only those issues still in dispute. The Neutral Auditors'
determination shall be made within 30 days of their selection,
whether or not such presentations by Seller and Purchaser have been
made within such period, shall be made in accordance with the terms
of this Section 1.4, and shall be set forth in a written statement
delivered to Seller and Purchaser and shall be final, binding and
conclusive. The term "Adjusted Closing Date Statement," as
hereinafter used, shall mean the definitive Closing Date Statement
agreed to by Purchaser and Seller in accordance with Section 1.4(c)
or the definitive Closing Date Statement resulting from the
determinations made by the Neutral Auditors in accordance with this
Section 1.4(d) (in addition to those items theretofore agreed to by
Seller and Purchaser), in each case prepared in the manner set forth
in the last sentence of Section 1.4(a) hereof. The Net Working
Capital Amount reflected on the Adjusted Closing Date Statement
shall not be more than that specified by Seller in its notice to
Purchaser pursuant to clause (c) above nor less than that specified
by Purchaser on the Closing Date Statement.
(e) The Purchase Price shall be increased or decreased, as the case may
be, dollar for dollar, to the extent the Net Working Capital Amount
reflected in the Adjusted Closing Date Statement is greater than or
less than, respectively, $67.8 million; provided that in no event
will such increase exceed $1.5 million. The amount of any increase
to or reduction of the Purchase Price pursuant to this Section 1.4
shall bear interest from the Closing Date through the date of
payment at the publicly announced base interest rate of Citicorp,
N.A. in effect from time to time from the Closing Date to the date
of such payment. The amount of any reduction of the Purchase Price
pursuant to this Section 1.4(e), together with interest thereon,
shall be paid by Seller by wire transfer in immediately available
funds to the account specified by Purchaser and the amount of any
increase to the Purchase Price pursuant to this Section 1.4(e),
together with interest thereon, shall be paid by the assignment to
Seller of bona fide accounts receivable of the Company from one of
the Company's customers identified in Section 1.4(e) of the
Disclosure Schedule which accounts are not past due on the date of
transfer and are not then the subject of any payment or other
dispute. In addition, prior to the Closing and without limitation as
to amount, Seller may cause the Company to assign such accounts
receivable to Seller to the extent that Seller believes in good
faith that such assignment will not cause the Net Working Capital
Amount to be less than $67.8 million. The collection of any accounts
receivable assigned to Seller pursuant to this paragraph (e) shall
be managed by the Company as agent for Seller and the Company shall,
promptly upon receipt thereof, remit all proceeds of such accounts
receivable to Seller without any set off or other reduction thereto.
Such payment or transfer, as the case may be, shall be made within
five business days after the Adjusted Closing Date Statement is
agreed to by Purchaser
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and Seller or any remaining disputed items are ultimately determined
by the Neutral Auditors.
(f) Seller and the Company have conducted a physical inventory of the
finished goods, work in progress and raw material of the Company
(the "Inventory") on December 2, 1995 (the "Inventory Date") which
representatives of Purchaser have observed. Purchaser and Seller
acknowledge and agree that the reserves for excess and obsolete
inventory reflected on the consolidated balance sheet of the Company
and the Subsidiaries as of November 30, 1995 (the "November Balance
Sheet") are adequate as of November 30, 1995 based on such physical
inventory. Neither party will dispute the adequacy of any reserves
for excess and obsolete inventory, other than with respect to any
changes thereto resulting from objective changes to actual physical
inventory levels after the Inventory Date.
5. Further Assurances. After the Closing, each party hereto shall,
and shall cause its officers, employees, agents and representatives to, from
time to time, at the request of the other party and without further cost or
expense to such other party, execute and deliver such other instruments of
conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby and to vest in Purchaser good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
1. Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan
and the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company and each
Subsidiary has full corporate power and authority to own its properties and
assets and to carry on its business as now being conducted and is duly qualified
or licensed to do business as a foreign corporation in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification, except jurisdictions in which the failure
to be so qualified or licensed would not have a material adverse effect on the
business, operations or financial condition of the Company and its subsidiaries
considered as a single enterprise (hereinafter referred to as a "Material
Adverse Effect"). Seller has delivered to Purchaser complete and correct copies
of the charter and all amendments thereto to the date hereof, and the bylaws as
presently in effect of the Company and the comparable governing documents of
each Subsidiary. Section 2.1 of the disclosure schedule relating to this
Agreement and identified by the execution
6
thereof by Purchaser and Seller (the "Disclosure Schedule") sets forth a list of
each of the Company's subsidiaries (the "Subsidiaries"). Each Subsidiary is a
corporation validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the power and authority to carry on its
business as now being conducted, and to own and operate the properties and
assets now owned and being operated by it. Except as set forth in Section 2.1 of
the Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any partnership, joint venture or
other business other than equity securities or ownership interests which are
immaterial in amount or significance.
2. Capital Stock. The authorized capital stock of the Company
consists of 10 shares of common stock, par value $100 per share, of which only
the Shares are issued and outstanding and no other shares of any other class or
series of capital stock of the Company are issued and outstanding. All of the
outstanding shares of capital stock of the Subsidiaries (the "Subsidiary
Shares") are owned by the Company. Except as set forth in Section 2.2 of the
Disclosure Schedule, there are no subscriptions, options, warrants, convertible
securities calls, rights, contracts, commitments, understandings, restrictions
or arrangements relating to the issuance, sale, redemption, acquisition,
repurchase, transfer or voting of any shares of common stock of the Company or
any of the Subsidiaries, including any rights of conversion or exchange under
any outstanding securities or other instruments. All of the Shares and
Subsidiary Shares have been duly authorized, validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section 2.2
of the Disclosure Schedule, there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company or any
of its Subsidiaries.
3. Ownership of Stock. The Shares are owned by Seller and the
Subsidiary Shares are owned directly by the Company, in each case free and clear
of all Encumbrances, other than the restrictions imposed by Federal and state
securities laws. Upon the consummation of the transactions contemplated hereby,
Purchaser will acquire title to the Shares, free and clear of all Encumbrances,
other than the restrictions imposed by Federal and state securities laws and
Encumbrances arising as a result of any action taken by Purchaser or any of its
affiliates ("Affiliates") as defined in Rule 12b-2 of the regulations
promulgated pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
4. Authorization, Etc. Seller has full corporate power and authority
to execute and deliver this Agreement and the documents contemplated hereby and
to carry out the transactions contemplated hereby and thereby. The Board of
Directors of Seller has duly approved and authorized the execution and delivery
by Seller of this Agreement and the documents contemplated hereby and the
consummation by Seller of the transactions contemplated hereby and thereby, and
no other corporate proceedings on the part of Seller are necessary to approve
and authorize the execution and delivery by Seller of this Agreement and the
documents contemplated hereby and the consummation by Seller of the transactions
contemplated hereby and thereby. This Agreement
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constitutes a valid and binding agreement of Seller, assuming the due execution
of this Agreement by Purchaser, enforceable against Seller in accordance with
its terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
5. Balance Sheet and Income Statement. Section 2.5 of the Disclosure
Schedule contains the unaudited consolidated Statement of Financial Position of
the Company as of October 28, 1995 (such Statement is referred to herein as the
"Balance Sheet" and the date of such Balance Sheet is referred to herein as the
"Balance Sheet Date") and the unaudited consolidated Statement of Operations of
the Company for the 10 months then ended. Except as set forth in Section 2.5 of
the Disclosure Schedule, such Balance Sheet and income statement were prepared
from, and are in accordance with, the books and records of the Company, fairly
present in all material respects the financial position and results of
operations of the Company and its Subsidiaries as of the date thereof and for
the period then ended and, except for the omission of a cash flow statement and
any required footnotes to the Financial Statements and as otherwise set forth
therein, have been prepared in accordance with GAAP applied on a basis
consistent with the presentation of financial information contained in the
Gerber Childrenswear, Inc. Offering Memorandum, dated May 1995. Except as
disclosed in Section 2.5 of the Disclosure Schedule, neither the Company nor any
of the Subsidiaries has any liabilities or obligations, whether accrued,
absolute, contingent or otherwise, other than (i) liabilities and obligations
that are reflected, accrued or reserved for in the Balance Sheet, (ii)
obligations incurred in the ordinary course of business and consistent with past
practice since the date of the Balance Sheet (none of which is a liability for
tort, breach of contract or warranty, infringement or violation of law), (iii)
liabilities that arise as a result of a breach of the representations and
warranties contained in Section 2.11 hereof and (iv) other liabilities and
obligations that are disclosed in the Disclosure Schedule or are otherwise
specifically the subject of any other representation or warranty contained in
this Article II.
6. No Approvals or Conflicts. Except as set forth in Section 2.6 of
the Disclosure Schedule, neither the execution and delivery by Seller of this
Agreement nor the consummation by Seller of the transactions contemplated hereby
will (i) violate, conflict with or result in a breach of any provision of the
charter or bylaws of Seller, the Company or any Subsidiary, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties of the Company or the Subsidiaries or
on Seller's interest in the Shares under, any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, lease, contract, agreement or other
instrument to which Seller, the Company, the Subsidiaries or any of their
respective properties may be bound, (iii) violate any order, injunction,
judgment, ruling, law or regulation of any court or governmental authority
applicable to Seller, the Company or the Subsidiaries or any of their respective
properties
8
or (iv) except for applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), require any consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any governmental or regulatory authority or other third
party; provided that insofar as the representations and warranties made in
clauses (ii), (iii) and (iv) of this Section 2.6 relate to Seller, they are
limited to those matters with respect to which a violation, breach, default,
conflict or other such event would have a material adverse effect on Seller's
ability to consummate the transactions contemplated hereby.
7. Compliance with Law; Governmental Authorizations. Except as set
forth in Section 2.7 of the Disclosure Schedule, the Company and the
Subsidiaries are not in violation in any material respect of any order,
injunction, judgment, ruling, law or regulation of any court or governmental
authority applicable to the property or business of the Company or the
Subsidiaries. Except as set forth in Section 2.7 of the Disclosure Schedule, the
licenses, permits and other governmental authorizations held by the Company and
the Subsidiaries are valid and sufficient for the conduct of the Company's
businesses as currently conducted in all material respects. Notwithstanding the
foregoing, this Section 2.7 shall not apply to Environmental Laws (as defined in
Section 2.16 hereof) and any permits required thereunder which are exclusively
the subject of the representation contained in Section 2.16 hereof. Except as
set forth in Section 2.7 of the Disclosure Schedule, the Company has paid all
import duties and other similar fees and charges due and payable by the Company
prior to the date hereof.
8. Litigation. Except as set forth in Section 2.8 of the Disclosure
Schedule, as of the date hereof, there are no claims, actions, injunctions,
proceedings (including arbitration proceedings) or investigations pending or, to
the knowledge of Seller, threatened against the Company or the Subsidiaries,
before any court or governmental or regulatory authority or body or arbitrator.
9. Title to Assets. Except as set forth in Section 2.9 of the
Disclosure Schedule, on the Balance Sheet Date, the Company had and, except with
respect to dispositions of assets in accordance with Section 2.10(c) since the
Balance Sheet Date (including distributions of all of the Company's and the
Subsidiaries' then cash balances to Seller immediately prior to the Closing),
the Company and the Subsidiaries now have, good and valid title to all the
personal property reflected on the Balance Sheet or which would have been
reflected on the Balance Sheet if acquired after the Balance Sheet Date, free
and clear of all Encumbrances of any nature except for (i) exceptions to title
as set forth in Section 2.9 of the Disclosure Schedule; (ii) liens for Taxes (as
defined in Section 2.11 below) not yet payable or any Taxes being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established on the Balance Sheet; (iii) liens arising as a matter of law in the
ordinary course of business, provided that the obligations secured by such liens
are not delinquent or are being contested in good faith; and (iv) such
imperfections of title and encumbrances, if any, as do not, in the aggregate,
materially interfere with the present use of any of the Company's or the
Subsidiaries' properties and assets subject thereto (the foregoing items (i)
9
through (v) are collectively referred to herein as "Permitted Encumbrances").
Except for cash (which will be distributed to Seller prior to the Closing
subject to the provisions of Section 1.3(d) hereof), assets disposed of in
accordance with Section 2.10(c) since the Balance Sheet Date and assets directly
related to the provision of those services described in Section 2.9 of the
Disclosure Schedule that are provided to the Company by Seller, the Company or
the Subsidiaries, as of the Balance Sheet Date and the date hereof, own, or have
valid leasehold interests in, and as of the Closing Date will own or have a
valid leasehold interest in, all material tangible properties and assets used in
the conduct of the Company's business.
10. Absence of Certain Changes. Except as disclosed in Section 2.10
of the Disclosure Schedule and as otherwise provided herein or in the other
agreements referred to herein, since the Balance Sheet Date and through the date
of this Agreement:
(a) the business of the Company and each Subsidiary has been conducted
only in the ordinary course and consistent with past practice in all
material respects;
(b) there has been no direct or indirect redemption, purchase or other
acquisition by the Company or any Subsidiary of any shares of its
capital stock, or any declaration, setting aside or payment of any
dividend or other distribution by the Company or any Subsidiary
other than cash management procedures in the ordinary course of
Seller's or the Company's or such Subsidiary's business, consistent
with past practice;
(c) there has been no sale, destruction, lien imposed upon, assignment
or transfer of any material assets of the Company or the
Subsidiaries (other than sales, assignments or transfers of
inventory in the ordinary course of business, consistent with past
practice and sales, assignments or transfers of other assets in an
amount not exceeding $50,000 in the aggregate in any one month);
(d) other than indebtedness between Seller and the Company, the Company
has not created, incurred, assumed or guaranteed (i) any
indebtedness for borrowed money (including capitalized lease
obligations) either involving more than $50,000 or outside the
ordinary course of business, consistent with past practice or (ii)
any letter of credit obligations outside the ordinary course of
business, consistent with past practice;
(e) the Company has not granted any compensation increase in excess of
$10,000 per year to any director, officer or employee or made or
granted any increase in benefits under, or employer contributions
to, any employee benefit plan or arrangement other than customary
increases consistent with past practice;
10
(f) the Company has not entered into any material amendment to any
material contract to which it is a party, entered into or terminated
any material contract or made any material change to the terms of
employment of any of the key executive officers of the Company;
(g) the Company has not made any material change to its accounting
procedures or practices (including its cash management procedures);
(h) the Company has not entered into any transaction with any Insiders
(as defined in Section 2.19 hereof) except in the ordinary course of
business, consistent with past practice; and
(i) the Company has not granted any license or sublicense to any person
of any material Intellectual Property (as defined in Section 2.14).
11. Taxes. (a) Except as set forth in Section 2.11 of the Disclosure
Schedule, (i) the Company, or an Affiliate of the Company on its behalf, has
duly filed with the appropriate Federal, state, local and foreign taxing
authorities all income Tax Returns (as defined below) and all other material Tax
Returns required to be filed by or with respect to the Company, the Subsidiaries
and each Seller Group as of the date hereof and such Tax Returns are true,
correct and complete in all material respects, (ii) the Company, the
Subsidiaries or an Affiliate of the Company on their behalf has paid or made
provision for in the Balance Sheet all material Taxes (as defined below) of the
Company and the Subsidiaries that are due or accrued as of the Balance Sheet
Date (whether or not such Taxes are shown on any Tax Return) and has paid or
accrued all material Taxes that have become due since the Balance Sheet Date,
(iii) neither the Company nor any of its Subsidiaries is a party to any tax
sharing or tax allocation agreement, (iv) neither the Company nor any of its
Subsidiaries has ever been a member of an Affiliated Group other than a Seller
Group in any taxable year for which the statute of limitations has not yet
expired; and (v) the Company and each of its Subsidiaries has withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party. Except as set forth in Section 2.11 of the
Disclosure Schedule there are no material liens for Taxes upon the assets of the
Company or the Subsidiaries except liens for current Taxes not yet due or Taxes
being contested in good faith by appropriate proceedings for which adequate
reserves have been established on the Balance Sheet. Except as set forth in
Section 2.11 of the Disclosure Schedule, as of the date hereof, none of the
Company, its Subsidiaries or any member of a Seller Group has received any
written notice of deficiency or assessment from any Federal, state, local or
foreign taxing authority with respect to liabilities for material Taxes of the
Company or the Subsidiaries which have not been paid or finally settled, and any
such deficiency or assessment disclosed in Section 2.11 of the Disclosure
Schedule is being contested in good faith through appropriate proceedings for
which adequate reserves have been established on the Balance Sheet.
11
(b) With respect to Taxes for which the Company or its Subsidiaries are
liable, except as set forth in Section 2.11 of the Disclosure
Schedule, none of the Company, its Subsidiaries, or any Seller Group
(i) is the subject of a Tax audit or other Tax examination, (ii) has
received written notification from any Tax authority that it will be
the subject of a Tax audit or other Tax examination, (iii) has
received written notification from any Tax authority where it does
not file Tax Returns that it is or may be subject to Tax in that
jurisdiction, or (iv) has waived or consented to extend the period
during which any Tax may be assessed.
(c) For purposes of this Agreement, "Affiliated Group" means an
affiliated group as defined in Section 1504 of the Code (or any
similar combined, consolidated or unitary group defined under state,
local or foreign income Tax law).
(d) For purposes of this Agreement, "Code" means the Internal Revenue
Code of 1986, as amended through the date hereof.
(e) For purposes of this Agreement, "Seller Group" shall mean any
Affiliated Group including the Seller and one or more of the Company
and its Subsidiaries.
(f) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any
United States Federal, state, local or foreign taxing authority,
including, but not limited to, income, service, leasing, occupation,
excise, property, sales and use, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto.
(g) For purposes of this Agreement, "Tax Return" shall mean any return,
report, information return or other document (including any related
or supporting information) filed or required to be filed with any
taxing authority with respect to Taxes.
12. Employee Benefits. (a) Schedule 2.12 of the Disclosure Schedule
sets forth a true and complete list of each employee benefit plan, bonus plan or
other contract or agreement with any employee that is maintained for employees
or former employees of the Company or the Subsidiaries by the Company (the
"Plans").
(b) Each of the Plans that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") is in material compliance
with the currently applicable provisions of ERISA and, except as
disclosed in Schedule 2.12 of the Disclosure Schedule, no Plan is
subject to Title IV of ERISA. Each of the Plans that is intended
12
to be qualified under Section 401(a) of the Code has received a
favorable determination letter that it is so qualified, nothing has
happened since the issuance of such letter which would result in a
revocation of such letter and each of the Plans were timely amended
and filed with the IRS for changes made by the Tax Reform Act of
1986.
(c) Except as disclosed in Section 2.12 of the Disclosure Schedule, all
contributions (including all employer contributions and employee
salary reduction contributions) that are due have been paid to each
Plan when required to be paid, and all contributions for any period
ending on or before the Closing Date that are not yet due but are
due prior to the Closing Date will be paid to each Plan or accrued
in accordance with the past practice of Seller and the Company;
provided that any further contributions by Seller or the Company
from and after the date hereof and prior to the Closing to the
Retirement Plan for Non-Salaried Employees of Gerber Childrenswear,
Inc. (the "Hourly Pension Plan") shall be reimbursed to Seller
pursuant to Section 6.10 hereof.
(d) There have been no prohibited transactions within the meaning of
Section 406 of ERISA or any material reportable events within the
meaning of Section 4043 of ERISA with respect to any Plan for which
Purchaser or the Company will be liable after the Closing and the
liability for which has not been reported and paid in full prior to
the Closing Date. No breach of fiduciary duty in connection with the
administration or investment of the assets of any Plan has occurred
which is reasonably likely to result in any material liability to
the Company or any of the Subsidiaries. As of the date hereof, no
charge, complaint, action, suit, proceedings, hearing,
investigation, claim, or demand with respect to the administration
or the investment of the assets of any Plan (other than routine
claims for benefits) is pending or, to the knowledge of Seller,
threatened.
(e) None of Seller, the Company or the Subsidiaries contributes to any
multiemployer plan, as defined in Section 3(37) of ERISA, on behalf
of employees or former employees of the Company or the Subsidiaries,
nor does the Company or any of the Subsidiaries have any liability
with respect to any multiemployer plan.
(f) All Form 5500 Annual Reports, Summary Annual Reports, PBGC-1s and
Summary Plan Descriptions with respect to each Plan have been
properly filed with the appropriate government agency or distributed
to participants, and the Company and its Subsidiaries have complied
in all material respects with the requirements of Section 498OB of
the Code.
(g) Except as set forth in Section 2.12 of the Disclosure Schedule, the
market value of assets under each Plan which is an employee pension
benefit plan (as defined in
13
Section 3(2) of ERISA) equals or exceeds the present value of all
benefit liabilities thereunder, determined on an on-going basis; and
no proceeding by the Pension Benefit Guaranty Corporation ("PBGC")
to terminate any such Plan has been instituted or threatened.
Neither the Company nor any of its Subsidiaries has incurred any
material liability arising as a result of any violation of
applicable law to the PBGC, the Internal Revenue Service, any
multiemployer plan or otherwise with respect to any Plan or with
respect to any employee pension benefit plan currently or previously
maintained by members of the controlled group of companies (as
defined in Section 414 of the Code) that includes the Company (the
"Controlled Group") that has not been satisfied in full.
(h) Except as set forth in Section 2.12 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries is obligated (under
any contract entered into before the Closing) to make any payments
that would be nondeductible under Section 280G of the Code (or any
corresponding provision of state, local, or foreign income Tax law).
13. Labor Relations. None of Seller, the Company or the Subsidiaries
is a party to any collective bargaining agreement applicable to employees of the
Company or the Subsidiaries. Except as set forth in Sections 2.8 and 2.13 of the
Disclosure Schedule, the Company and the Subsidiaries are in material compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours and are not engaged in any
unfair labor practice, and, as of the date hereof, there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the knowledge of Seller,
threatened against or affecting the Company or the Subsidiaries.
14. Patents, Trademarks, Trade Names, Etc. Sections 2.14 (1)(A),
2.14(1)(B), 2.14(3)(A), 2.14(6) and 2.14(7) of the Disclosure Schedule contain
an accurate description identifying all registered patents, trademarks, service
marks, trade dress, trade names and copyrights (collectively, "Registered
Intellectual Property") and Sections 2.14(2) and 2.14(3)(B) of the Disclosure
Schedule contain an accurate description identifying all material common law
trademarks, service marks, trade dress and trade names (such material common
law trademarks, service marks, trade dress and trade names, together with the
Registered Intellectual Property, the "Intellectual Property") used in the
conduct of the Company's business as of the Balance Sheet Date and the Date
hereof and, as such sections of the Disclosure Schedule may be amended, as of
the Closing Date, or owned by the Company or the Subsidiaries, all registrations
and applications therefor, and Section 2.14 of the Disclosure Schedule contains
a list of all material licenses and other agreements relating thereto. Except as
set forth in Section 2.14 of the Disclosure Schedule, (i) the Company or its
Subsidiaries owns, free and clear of all Encumbrances (other than Permitted
Encumbrances) or has a valid right to use the Intellectual Property and all
material trade secrets, confidential business information and other know-how in
each case necessary for the operation of their business as presently conducted
in all material respects, (ii) the consummation of the transactions contemplated
14
by this Agreement will not impair the validity, enforceability, ownership or
right to use of the Intellectual Property, (iii) no claims have been asserted in
writing by any person to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such license or
agreement, (iv) neither the Company nor any Subsidiary has infringed upon or
misappropriated in any material respect any rights of third parties with
respect to any of the Registered Intellectual Property and no third party has
infringed upon or misappropriated in any material respect any rights of the
Company or the Subsidiaries with respect to the Registered Intellectual Property
and (v) to the knowledge of Seller, neither the Company nor any Subsidiary has
infringed upon or misappropriated in any material respect any rights of third
parties with respect to any Intellectual Property that is not Registered
Intellectual Property and to the knowledge of Seller, no third party has
infringed upon or misappropriated in any material respect any rights of the
Company or the Subsidiaries with respect to Intellectual Property that is not
Registered Intellectual Property.
15. Contracts. Section 2.15(a) of the Disclosure Schedule contains a
true and complete list of each of the following to which the Company or any of
the Subsidiaries is a party: (i) all agreements and arrangements relating to the
borrowing of money by the Company or any Subsidiary or any mortgaging or
pledging of any assets owned by the Company or any Subsidiary and all letters of
credit issued by any third party for the benefit of the Company or any
subsidiary, (ii) any guaranties by the Company or any Subsidiary of any
obligation for borrowed money of any third party, (iii) all employment,
management, consulting or severance agreements between the Company and any
officer, director, employee or full-time consultant of the Company providing for
annual compensation in excess of $50,000 or any extraordinary payments as a
result of a change in control of the Company, (iv) any capitalized lease
obligations providing for payments in excess of $50,000 in the aggregate and (v)
any agreements that prohibit the Company in any material respect from freely
engaging in its business as presently conducted. Except as set forth in Section
2.15(b) of the Disclosure Schedule, each of the material contracts, agreements
and understandings to which the Company or any of the Subsidiaries is or, as of
the Closing Date, will be a party (including the software licenses identified in
Section 2.15 of the Disclosure Schedule which the Company is entitled to the
benefit of) or by which any of its assets or operations may be bound is in full
force and effect, and there are no existing breaches or defaults by the Company
or such Subsidiary or, to the knowledge of Seller, any other party thereunder
nor has any event occurred which would permit the termination or acceleration
thereof or which, with notice or lapse of time, would constitute a breach or
default thereunder. The Company has not entered into any agreement with any
director, officer or employee that will require the acceleration of any
compensation or the payment of any bonus as a result of the consummation of the
transactions contemplated hereby.
16. Environmental Matters. (a) Except as set forth in Section 2.16
of the Disclosure Schedule, neither the Company nor any of the Subsidiaries has
received any written notice, since January 1, 1993, alleging the violation of,
or any liabilities arising under, any applicable Environmental Laws or
asserting any common law claim relating to any environmental matter with respect
to the business of the Company or any of the Subsidiaries or any real property
owned
15
or leased by the Company or the Subsidiaries and the Company and the
Subsidiaries are in compliance in all material respects with all Environmental
Laws.
(b) Except as set forth in Section 2.16 of the Disclosure Schedule, (i)
the Company and its Subsidiaries have obtained, and are in
compliance with, all material permits required pursuant to
applicable Environmental Laws with respect to the business of the
Company and the Subsidiaries as currently conducted, (ii) no
Hazardous Material has been stored, treated or disposed of by the
Company or the Subsidiaries on the real estate currently owned or
operated by the Company or the Subsidiaries except in compliance in
all material respects with applicable Environmental Laws, (iii) the
Company and the Subsidiaries have lawfully disposed of Hazardous
Material used, handled or generated by the Company or the
Subsidiaries in all material respects and (iv) neither the Company
nor any of the Subsidiaries nor any predecessor in interest to the
properties presently owned or leased by the Company or the
Subsidiaries has stored, treated, transported, disposed of or
arranged for the disposal of any Hazardous Material in a manner
that is reasonably likely to give rise to any material remedial
action or response costs pursuant to Environmental Laws.
(c) Except as set forth in Section 2.16 of the Disclosure Schedule, no
written or, to the knowledge of Seller, oral notice of Release of
Hazardous Material has been filed since January 1, 1993 by or on
behalf of the Company or any of the Subsidiaries pursuant to
Environmental Laws, and, to the knowledge of Seller, no property or
facility now owned or operated by the Company or any of the
Subsidiaries is on the CERCLA National Priorities List, the
Comprehensive Environmental Response, Compensation, and Liability
Information System index or any similar state list.
(d) For purposes of this Agreement, (i) "Environmental Laws" shall mean
all federal, state, local and foreign statutes, rules, regulations,
ordinances and other such provisions having the force and effect of
law, all judicial and administrative orders concerning public health
and safety, worker health and safety, and pollution or protection of
the environment, including without limitation all those relating to
the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, Release, threatened Release, control or
cleanup of any Hazardous Material; (ii) "Hazardous Material" shall
mean anything that is a "hazardous substance" pursuant to the
Comprehensive Response, Compensation, and Liability Act ("CERCLA"),
any substance that is a "solid waste" or "hazardous waste" pursuant
to the Resource Conservation and Recovery Act, any pesticide,
pollutant, contaminant, toxic chemical, petroleum product or
byproduct, asbestos, polychlorinated biphenyl or radiation; and
(iii) "Release" shall have the meaning set forth in CERCLA.
16
17. Insurance. Section 2.17 of the Disclosure Schedule lists all
material insurance policies covering the assets, employees and operations of the
Company and the Subsidiaries as of the date hereof. All insurance coverage and
bonds with respect to the properties and business of the Company and the
Subsidiaries that are in effect as of the date hereof shall be terminated as of
the Closing Date.
18. Title to Real Estate Properties. (a) Section 2.18 of the
Disclosure Schedule attached hereto lists and briefly describes all real
property owned by the Company or its Subsidiaries. With respect to each such
parcel of owned real property: (i) the identified owner has good and valid title
to the parcel of real property, free and clear of any Encumbrance, except for
(A) statutory liens for current taxes or other governmental charges with respect
to such real property not yet due and payable or the amount or validity of which
is being contested in good faith by appropriate proceedings by the Company or
its Subsidiaries and for which appropriate reserves have been established, (B)
mechanics', carriers', workmans' and other similar statutory liens arising or
incurred in the ordinary course of business with respect to obligations that are
not delinquent, (C) zoning, entitlement, building and other land use regulations
imposed by governmental agencies having jurisdiction over the real property
which are not violated by the current use and operation of the real property,
and (D) covenants, conditions, restrictions, easements and other matters
affecting title to the real property which do not materially impair the use of
the real property for the purposes for which it is used in connection with the
businesses of the Company and its Subsidiaries (the foregoing items (A) through
(D) collectively referred to as "Permitted Liens"); (ii) there are no pending
or, to the knowledge of Seller, threatened condemnation proceedings relating to
the property; (iii) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of real property; and (iv) there
are no outstanding options or rights of first refusal to purchase any parcel of
real property, or any portion thereof or interest therein;
(b) Section 2.18 of the Disclosure Schedule attached hereto lists and
describes briefly all real property that is used or occupied by the
Company or its Subsidiaries in connection with their businesses but
not owned by the Company or its Subsidiaries and the leases,
subleases and agreements by which such property is used and
occupied. Except as otherwise described in Section 2.18 of the
Disclosure Schedule, with respect to each such parcel of leased real
property: (i) the leases and subleases described in Section 2.18 of
the Disclosure Schedule constitute all of the leases, subleases and
agreements under which the Company or any of its Subsidiaries hold
any interest in any real estate used in connection with their
businesses; (ii) the Company has made available to Purchaser and its
counsel true, correct and complete copies of all of the leases,
subleases and agreements described in Section 2.18 of the Disclosure
Schedule; (iii) each such lease, sublease or agreement is in full
force and effect; (iv) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, to which Seller
or the Company is a party granting to any party or
17
parties (other than the Company or its subsidiaries) the right of
use or occupancy of such parcel of leased real property; and (v) all
rents payable by the Company under such leases and subleases due
prior to the date hereof have been paid and neither the Company nor
any of its Subsidiaries nor, to the knowledge of Seller, any other
party to any such lease, sublease or agreement is in material breach
or default thereof, and no event has occurred which, with notice or
the lapse of time, or both, would constitute such a breach or
default or permit termination, modification or acceleration thereof
or thereunder. With respect to the lease for office space in
Charlotte, North Carolina between Equitable American Property, Inc.,
as landlord and Gerber Childrenswear, Inc., as tenant and the lease
for the warehouse facility in Ballinger, Texas between C.O.
Richards, Trustee of the Edna Wylie Real Estate Trust and C.H. Wylie
Real Estate Trust, as landlord and Gerber Childrenswear, Inc., as
tenant described on Section 2.18 to the Disclosure Schedule, neither
tenant under such leases has sent any written notice to the
applicable landlord with respect to such tenant's right to purchase
the premises described under such lease.
19. Affiliate Transactions. Except as disclosed in Section 2.19 of
the Disclosure Schedule, no officer, director, employee, stockholder or
Affiliate of the Company or any of its Subsidiaries, or any immediate family
member of any of the foregoing, (collectively, the "Insiders"), is a party to
any agreement or contract with the Company or any of its Subsidiaries or has any
interest in any material property, real or personal or mixed, tangible or
intangible, used in the business of the Company or any of its Subsidiaries.
20. No Brokers' or Other Fees. Except for the fees payable to
Wasserstein Perella & Co., Inc. by Seller, no broker, finder or investment
banker is entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Seller or
the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
1. Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
2. Authorization, Etc. Purchaser has full corporate power and
authority to execute and deliver this Agreement, the Note and the other
documents contemplated hereby and to carry out the transactions contemplated
hereby and thereby. The Board of Directors of Pur-
18
chaser has duly approved and authorized the execution and delivery by Purchaser
of this Agreement, the Note and the other documents contemplated hereby and the
consummation by Purchaser of the transactions contemplated hereby and thereby,
and no other corporate proceedings on the part of Purchaser are necessary to
approve and authorize the execution and delivery by Purchaser of this Agreement,
the Note and the other documents contemplated hereby and the consummation by
Purchaser of the transactions contemplated hereby and thereby. This Agreement
and the Note constitute valid and binding agreements of Purchaser, assuming the
due execution of this Agreement by Seller, enforceable against Purchaser in
accordance with their terms, except that (i) the enforcement hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
3. No Approvals or Conflicts. Except as set forth in Section 3.3 of
the Disclosure Schedule, neither the execution and delivery by Purchaser of this
Agreement and the Note nor the consummation by Purchaser of the transactions
contemplated hereby and thereby will (i) violate, conflict with or result in a
breach of any provision of the charter or bylaws of Purchaser, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of Purchaser's properties under, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which Purchaser or its subsidiaries or any of
their respective properties may be bound, (iii) violate any order, injunction,
judgment, ruling, law or regulation of any court or governmental authority
applicable to Purchaser or its subsidiaries or any of their respective
properties, or (iv) except for applicable requirements of the Exchange Act and
the HSR Act, require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority or other third party, which, in the case of clauses (ii), (iii) and
(iv) above, would have a material adverse effect on the business, operations or
financial condition of Purchaser and its subsidiaries, considered as a single
enterprise or on Purchaser's ability to consummate the transactions contemplated
hereby.
4. Acquisition for Investment. Purchaser is acquiring the Shares
solely for its own account and not with a view to any distribution or other
disposition of such Shares, and the Shares will not be transferred except in a
transaction registered or exempt from registration under the Securities Act of
1933, as amended.
5. Financing. Purchaser has received written commitments for debt
and equity financing (the "Financing") for the consummation of the transactions
contemplated hereby (the "Commitment Letters"). The proceeds of the Financing
set forth in the Commitment
19
Letters, together with Purchaser's cash on hand as of the date hereof and as of
the Closing Date, will be sufficient to enable Purchaser to pay the full amount
of the cash Purchase Price at the Closing. True and complete copies of each of
the Commitment Letters are set forth in Section 3.5 of the Disclosure Schedule.
6. Hart-Scott-Rodino Act. Purchaser is its own "ultimate parent
entity" as such term is defined by the rules promulgated in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Rules"). Purchaser does not have a regularly prepared balance sheet and does not
have annual net sales or total assets of ten million dollars or more as defined
by Section 801.11(e) of the HSR Rules.
7. No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Purchaser.
ARTICLE IV
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to effect the Closing under this Agreement
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless waived in writing by Seller.
1. Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made at such date, except for changes expressly permitted by
this Agreement or the other agreements referred to herein.
2. Performance. Purchaser shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Purchaser prior to the
Closing.
3. Officer's Certificate. Purchaser shall have delivered to Seller a
certificate, dated the Closing Date and executed by the President or a Vice
President of Purchaser, certifying to the fulfillment of the conditions
specified in Sections 4.1 and 4.2 hereof.
4. HSR Act. All applicable waiting periods under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
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5. Injunctions. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein not be consummated as provided herein.
6. Consents. Those material governmental consents necessary to
effect the Closing shall have been obtained.
7. License and Distributor Agreement. The Company shall have entered
into the Gerber License and the Distributor Agreement (as defined in Section
6.11 below).
8. Release of Letters of Credit. All outstanding letters of credit
for purchases of goods or services by, or otherwise issued for the benefit of,
the Company or any Subsidiary with respect to which Seller has any obligations
shall be terminated or Seller shall be unconditionally released from, or
indemnified by a responsible financial institution in a form satisfactory to
Seller for, all obligations with respect thereto.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Purchaser.
1. Representations and Warranties. The representations and
warranties made by Seller in this Agreement shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made at such date, except for changes expressly permitted by
the terms of this Agreement or the other agreements referred to herein.
2. Performance. Seller shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Seller prior to the
Closing.
3. Officer's Certificate. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by the President or a Vice
President of Seller, certifying to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 hereof.
4. Resignation of Directors. Seller shall have delivered to
Purchaser the written resignations of all of the directors of the Company
effective as of the Closing Date.
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5. HSR Act. All applicable waiting periods under the HSR Act with
respect to the transactions contemplated hereby shall have expired or been
terminated.
6. Injunctions. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or other order in effect of any nature
issued by a court or governmental agency of competent jurisdiction directing
that the transactions provided for herein not be consummated as provided herein.
7. Consents. Those material governmental and third party consents
necessary to effect the Closing and for the Company to operate its business in
all material respects after the Closing as presently operated shall have been
obtained.
8. Ancillary Agreements. Seller shall have entered into the Gerber
License, the Transition Services Agreement (as such terms are defined in Section
6.11 below) and the Distributor Agreement and each shall be in full force and
effect.
9. Title Insurance. Seller will have obtained and delivered to
Purchaser an ALTA Owner's Policy of Title Insurance for each of the parcels of
owned real property and the ground lease of the property located in Fort Kent,
Maine listed in Section 2.18 of the Disclosure Schedule, issued by Chicago Title
Insurance Company or another title insurer reasonably satisfactory to Purchaser
(the "Title Insurer"), in the amount of the fair market value thereof (including
all improvements thereon), insuring Purchaser's interest in such parcel as of
the Closing, subject only to the Permitted Liens. Such title policies shall
include such endorsements as Purchaser shall reasonably require (including
without limitation non-imputation endorsements) to the extent such endorsement
are reasonably obtainable. Seller shall provide such affidavits as are customary
and as the Title Insurer shall reasonably require in connection with providing
non-imputation endorsements. The cost and expense of obtaining such policies
shall be borne 50% by Purchaser and 50% by Seller, provided that Seller's
obligations under Section 5.9 and 5.10 shall not exceed $45,000 in the
aggregate.
10. Surveys. Seller shall have procured and delivered to Purchaser,
current surveys of each of the parcels of owned real property and the ground
lease of the property located in Fort Kent, Maine listed in Section 2.18 of the
Disclosure Schedule prepared by a licensed surveyor and conforming to the
Minimum Standard Detail Requirements jointly established and approved in 1992 by
ALTA and ACSM and certified to Purchaser, Purchaser's lender and the Title
Insurer and showing no encroachments or defects on such parcels of owned real
property other than Permitted Liens. The cost and expense of obtaining such
surveys shall be borne 50% by Purchaser and 50% by Seller, provided that
Seller's obligations under Section 5.9 and 5.10 shall not exceed $45,000 in the
aggregate.
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11. Material Adverse Change. Since November 30, 1995, there has been
no material adverse change to the business, assets, results of operations or
financial condition of the Company and the Subsidiaries, considered as a single
enterprise.
ARTICLE VI
COVENANTS AND AGREEMENTS
1. Conduct of Business by Seller. Seller covenants that, except (i)
for actions taken to implement this Agreement and the transactions contemplated
hereby, (ii) as disclosed in the Disclosure Schedule, (iii) for distributions of
the Company's then cash balances to Seller immediately prior to the Closing
(subject to the provisions of Section 1.3(d)), (iv) for any assignment of
accounts receivable to Seller pursuant to Section 1.4(e) or (v) as consented to
by Purchaser, from and after the date of this Agreement and until the Closing
Date Seller shall:
(a) use reasonable efforts consistent with good business judgment to
preserve intact the present business organization and relationships
of the Company and the Subsidiaries and generally operate the
Company and the Subsidiaries in the ordinary and regular course of
business consistent with prior practices in all material respects
(including, without limitation, with respect to maintenance of
working capital balances and cash management practices);
(b) refrain from (i) causing to be issued, sold or transferred any
shares of capital stock or other securities of the Company or any
options, warrants or commitments of any kind with respect thereto,
(ii) directly or indirectly causing to be purchased, redeemed or
otherwise acquired or disposed of any shares of capital stock of the
Company; (iii) declaring, setting aside or paying any dividend or
other distribution other than cash management procedures in the
ordinary course of Seller's or the Company's business; (iv)
permitting or allowing the Company or a Subsidiary to borrow or
agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money, other than in the
ordinary course of business and consistent with past practice, (v)
subjecting any of the property or assets of the Company or any
Subsidiary (real, personal or mixed, tangible or intangible) to any
material mortgage, pledge, lien or encumbrance or otherwise
permitting or allowing the disposition of any material property or
assets of the Company or any Subsidiary (real, personal or mixed,
tangible or intangible), other than sales of inventory in the
ordinary course of business and sales of other assets in an
aggregate amount not exceeding $50,000 in any month, or (vi)
agreeing to do any of the foregoing;
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(c) maintain the books and records of the Company in accordance with
prior practice;
(d) not take or cause to be taken or permit or suffer to occur, any
action or event described in Section 2.10 hereof; and
(e) not pay or permit the Company to pay any of the 1995 Bonuses.
2. Access to Books and Records; Cooperation.
(a) Except as otherwise provided in Section 6.4, each party agrees that
from the date hereof until the Closing and, with respect to any
financial reporting matters or tax matters that are the subject of
Section 6.4, after the Closing until such time as the statute of
limitations with respect to such tax matters has expired, during
normal business hours, such party will permit, at no charge, cost or
expense to such party and without disruption of such party's
business, the other party hereto and its auditors and other
representatives to have reasonable access to the properties,
auditors and officers of the Company and to all books and records
relating to the Company and to examine and take copies thereof.
(b) Each party agrees not to destroy at any time any files or records
which are subject to Section 6.2(a) without giving reasonable notice
to the other party, and within 30 days of receipt of such notice,
such other party may cause to be delivered to it the records
intended to be destroyed, at such other party's expense.
3. Filings and Consents. Each of Seller and Purchaser: (a) shall
promptly prepare and make any required filings under the HSR Act and (b) shall
use all reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement. Seller
and Purchaser will furnish to one another such necessary information and
reasonable assistance as may be requested in connection with the preparation of
filings or submissions under the HSR Act.
4. Tax Matters.
(a) Liability of Seller for Taxable Periods Ending On or Before Closing
Date. Seller shall be liable for, and shall indemnify and hold
Purchaser, the Company and the Subsidiaries harmless against, all
Taxes payable by the Company and the Subsidiaries for all taxable
periods ending on or before the Closing Date (including, without
limitation, (i) all income Taxes arising from the transfer of the
Shares or as a result of the Section 338 (h)(10) Election (as
defined below) and
24
(ii) any liability for the Taxes of any Person under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign law),
as a transferee or successor, by contract, or otherwise), but, with
respect to Taxes other than income Taxes, only to the extent that
the amount of such other Taxes exceeds the amount of such other
Taxes that have been provided for in the Closing Date Statement.
Notwithstanding the foregoing or any other provision of this
Agreement, Purchaser, the Company and the Subsidiaries shall be
liable for, and shall indemnify and hold Seller and its Affiliates
harmless against, (x) all Taxes arising from transactions that occur
outside of the ordinary course of business after the Closing on the
Closing Date and (y) all sales, use, transfer or other similar Taxes
arising out of the transfer of the Shares or the election to be made
with respect to the transactions contemplated by this Agreement
under Section 338(h)(10) of the Code (or any other election under
any similar state or local statute) (the "Section 338(h)(10)
Election"). Seller shall file all Tax Returns relating to the
Company and its Subsidiaries for all taxable periods ending on or
before the Closing Date. Seller shall determine the amount of
taxable income or loss of the Company and its Subsidiaries for
periods ending on or prior to the Closing Date on the basis of its
permanent records and consistent with the past income tax accounting
methods utilized in preparing its prior income tax returns. Such
determination shall be binding on Seller and Purchaser to the extent
allowable under applicable law.
(b) Liability of Parties for Straddle Period Taxes. With respect to any
taxable period that begins on or before the Closing Date and ends
after the Closing Date (a "Straddle Period"), Seller shall be liable
for, and shall indemnify and hold Purchaser, the Company and the
Subsidiaries harmless against, all Taxes that relate to the portion
of such period ending on the Closing Date, but only to the extent
that such Taxes exceed the sum of (i) the aggregate estimated Tax
payments made by Seller, the Company, its Subsidiaries and any
Seller Group with respect to such Taxes prior to the Closing and
(ii) the amount of Taxes reflected as a liability on the Closing
Date Statement. Purchaser, the Company and the Subsidiaries shall be
liable for, and shall indemnify and hold Seller and its Affiliates
harmless against, all Taxes that relate to the portion of such
period beginning on the day after the Closing Date or that are
reflected as a liability on the Closing Date Statement. For these
purposes, Taxes that are based on sales or net income shall be
allocated between the portion of the period ending on the Closing
Date and the portion of the period beginning after the Closing Date
based upon an interim closing of the books as of the close of
business on the Closing Date. Taxes that are not based on sales or
net income shall be allocated between the portion of the period
ending on the Closing Date and the portion of the period beginning
after the Closing Date based upon the relative number of days in
each such period. Purchaser shall be responsible for the preparation
and filing of all
25
Tax Returns relating to Straddle Periods, which shall be prepared
based on the permanent records of the Company and the Subsidiaries,
consistent with past Tax accounting methods in preparing prior Tax
Returns. At least 10 days prior to the due date for filing any such
Tax Return, Purchaser shall furnish copies of such Tax Return to
Seller, along with Purchaser's computation of the portion of such
Taxes for which Purchaser believes Seller is liable, for Seller's
review and comment. Any dispute regarding such Tax Returns or the
amount for which Seller is liable pursuant to such Tax Returns shall
be resolved in accordance with the dispute resolution procedure of
Section 6.4(g) hereof. Seller shall pay any amounts it owes to
Purchaser under this Section 6.4(b) no later than the last to occur
of (A) the date that is 10 days after the date of receipt of
Purchaser's computation of the amount owed by Seller, (B) the date
that is 10 days after the date of resolution of any dispute resolved
under the dispute resolution procedure of Section 6.4(g) and (C) the
date that is five days before the due date for payment of the
applicable Tax.
(c) Liability of Purchaser for Taxable Periods Beginning After Closing
Date. Purchaser and the Company shall be liable for, and shall
indemnify and hold Seller and any of its affiliates harmless
against, all Taxes payable by the Company or any of the Subsidiaries
for any taxable periods beginning after the Closing Date. Purchaser
shall file all Tax Returns relating to the Company and the
Subsidiaries for all taxable periods beginning after the Closing
Date. Purchaser will forego the carryback period with respect to
any net operating losses or capital losses of the Company or its
Subsidiaries under Section 172 or Section 1212 of the Code to the
extent such carryback period includes taxable periods ending on or
before the Closing Date.
(d) Refunds or Credits. Any refunds or credits of Taxes for which Seller
is liable pursuant to Section 6.4(a) or Section 6.4(b) shall be
solely for the account of Seller, and, to the extent that such
refunds or credits are attributable to Taxes for which Purchaser is
liable pursuant to Section 6.4(b) or Section 6.4(c), such refunds or
credits shall be solely for the account of Purchaser. Purchaser
shall cause the Company and the Subsidiaries promptly to forward to
Seller or to reimburse Seller for any such refunds or credits due
Seller after receipt thereof by Purchaser, the Company or any of the
Subsidiaries, and Seller shall promptly forward to Purchaser or
reimburse Purchaser for any refunds or credits due Purchaser after
receipt thereof by Seller of such refunds or credits that are for
the account of the Purchaser or the Company hereunder.
(e) Mutual Cooperation. As soon as practicable, but in any event within
30 days after Seller's or Purchaser's request, as the case may be,
Purchaser shall or shall cause
26
the Company to deliver to Seller, or Seller shall deliver to
Purchaser, such information and other data in the possession of
Seller, Purchaser, the Company or any Subsidiary, as the case may
be, relating to the Tax Returns and Taxes of the Company and
Subsidiaries, including such information and other data customarily
required by Seller or Purchaser, as the case may be, to cause the
payment of all Taxes or to permit the preparation of any Tax Returns
for which it has responsibility or liability or to respond to audits
by any taxing authorities with respect to any Tax Returns or Taxes
for which it has any responsibility or liability under this
Agreement or otherwise or to otherwise enable Seller or Purchaser,
as the case may be, to satisfy its accounting or Tax requirements.
In connection with the foregoing, Purchaser and Seller shall make
available such knowledgeable employees of the Company or Seller, as
the case may be, as Seller or Purchaser may reasonably request,
which employees shall, among other things, prepare all schedules,
work papers and other documents in a manner consistent with past
practice that are reasonably necessary to assist Seller in preparing
Tax Returns or satisfying its financial reporting requirements. Upon
Seller's reasonable request, Purchaser shall cause an appropriate
officer of the Company or the Subsidiaries to sign Tax Returns
relating to periods ending on or prior to the Closing Date. For a
period of six years after the Closing, and, if at the expiration
thereof any Tax audit or judicial proceeding is in progress or the
applicable statute of limitations has been extended in writing, for
such longer period as such audit or judicial proceeding is in
progress or such statutory period has been agreed to be extended,
Purchaser shall, and shall cause the Company and the Subsidiaries
to, maintain and make available to Seller, on Seller's reasonable
request, copies of any and all information, books and records
referred to in this Section 6.4(e). After such period, Purchaser or
the Company may dispose of such information, books and records,
provided that prior to such disposition Purchaser shall give Seller
a reasonable opportunity to take possession of such information,
books and records.
(f) Contests. Whenever any taxing authority asserts a claim, makes an
assessment or otherwise disputes or affects the Tax reporting
position of the Company or Subsidiaries for periods for which Seller
is or may be liable under this Agreement, Purchaser shall, promptly
upon receipt by Purchaser, the Company or any Subsidiary of notice
thereof, inform Seller. Seller shall have the right to control any
resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute, to the extent such
proceedings or determinations affect the Tax reporting position of
the Company or any Subsidiary or the amount of Taxes for which
Seller is or may be liable for all taxable periods ending on or
before the Closing Date; provided, however, that Seller shall not
settle any such claim, assessment, or dispute in a manner that
adversely affects the Tax liability of the Company or any of its
Subsidiaries for any Tax period ending
27
after the Closing Date without Purchaser's prior consent (which
consent shall not be unreasonably withheld). Whenever any taxing
authority asserts a claim, makes an assessment or otherwise disputes
the amount of Taxes for which Purchaser is liable under this
Agreement, Seller shall, promptly upon receiving notice thereof,
inform Purchaser. Purchaser shall have the right to control any
resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute, to the extent such
proceedings affect the amount of Taxes for which Purchaser is liable
under this Agreement for all taxable periods beginning after the
Closing Date; provided, however, that Purchaser and its Affiliates
shall not (and shall cause the Company and its Subsidiaries not to)
(i) take any position on any Tax Return or in any contest or
proceeding that is inconsistent with this Agreement or a position
taken by Seller and its Affiliates (including the Company and its
Subsidiaries) with respect to Taxes incurred on or prior to the
Closing Date, or (ii) settle any claim, assessment, or dispute in a
manner that adversely affects the Tax liability of the Company, its
Subsidiaries or any Seller Group for any Tax period beginning before
the Closing Date, in each case without Seller's prior consent (which
consent shall not be unreasonably withheld). Seller and Purchaser
will jointly control and determine whether to settle any claim,
assessment or dispute asserted or made by any taxing authority with
respect to Taxes attributable to a Straddle Period. No such claim,
assessment or dispute shall be settled without the prior consent of
both Seller and Purchaser (which consent shall not be unreasonably
withheld).
(g) Resolution of Disagreements Between Seller and Purchaser. If Seller
and Purchaser disagree as to the amount for which each is liable
under this Section 6.4, Seller and Purchaser shall promptly consult
with each other in an effort to resolve such dispute. If any such
point of disagreement cannot be resolved within 15 days (or, in the
case of dispute arising under Section 6.4(b), five days) after the
date of consultation, Seller and Purchaser shall jointly select from
the "Big Six" accounting firms (which are listed in Section 6.4 of
the Disclosure Schedule), a firm of independent public accountants
which has not performed any services since January 1, 1990 for
Seller, Purchaser or their respective Affiliates, to act as an
arbitrator to resolve all points of disagreement concerning Tax
accounting matters with respect to this Agreement. If the parties
cannot agree on the selection of an accounting firm within 15 days
(or, in the case of a dispute arising under Section 6.4(b), five
days), then such accounting firm shall be selected by the Chief
Judge of the United States District Court for the Western District
of Michigan.
(h) 338(h)(10) Election. Seller, Purchaser and their respective
Affiliates will jointly execute and make a timely election on Form
8023-A or in such other manner as
28
may be required by rule or regulation of the Internal Revenue
Service under Section 338(h)(10) of the Code for the Company and its
Subsidiaries, and jointly execute and make a timely election in the
manner required under any similar state or local statute as Seller
shall designate or as shall be required, concerning the transactions
contemplated by this Agreement. Seller shall pay, and shall
indemnify Purchaser, the Company and the Subsidiaries against, all
income Taxes resulting from the Section 338(h)(10) Election.
Purchaser shall pay, and shall indemnify Seller and its Affiliates
against, all sales, use, transfer or other similar Taxes resulting
from the Section 338(h)(10) Election. Purchaser and Seller shall use
their best efforts to agree, as soon as practicable after Closing
but in no event later than 60 days following the Closing Date, on
the computation of the Modified Aggregate Deemed Sale Price
("MADSP") (as defined under Treasury Regulations) and the
allocation of the MADSP among the assets as of the Closing Date.
Purchaser shall, with the assistance and cooperation of Seller,
prepare initial drafts of all forms required to be filed with
respect to the Section 338(h)(10) Election in accordance with
applicable Tax laws, and Purchaser shall deliver such forms and
related documents to Seller at least 120 days prior to the due date
of filing. Purchaser and Seller will agree on the content of the
forms for the Section 338(h)(10) Election and will execute such
forms (or cause such forms to be executed) at least 45 days prior to
the due date of filing such completed forms. Seller shall be
responsible for filing such completed forms. Any disputes regarding
any aspect of the Section 338(h)(10) Election shall be resolved in
accordance with the dispute resolution procedure of Section 6.4(g)
hereof. Seller shall indemnify Purchaser for all Taxes incurred by
Purchaser, the Company or its Subsidiaries as a result off Seller's
failure to comply with its obligations under this Section 6.4(h),
and Purchaser shall indemnify Seller for all Taxes incurred by
Seller or its Affiliates as a result of Purchaser's failure to
comply with its obligations under this Section 6.4(h).
(i) From and after the Closing, Purchaser and the Company will be
responsible for the fees of Mintax, Inc. pursuant to the Engagement
Agreement between Seller and Mintax, Inc. entered into by Seller on
February 12, 1992 relating to state tax incentives of the Company
applicable to Taxes for which Purchaser is responsible pursuant to
Section 6.4(b) or Section 6.4(c).
(j) Tax Sharing Agreement. The obligations of the Company and the
Subsidiaries under any Tax sharing agreements or similar
arrangements with respect to or involving the Company and its
Subsidiaries shall be terminated as of the Closing Date and, after
the Closing Date, the Company and its Subsidiaries shall not be
bound thereby or have any liability thereunder.
29
(k) Exclusive Remedy. As between Purchaser, the Company and its
Subsidiaries, on the one hand, and Seller, on the other hand, the
rights, indemnifications and obligations set forth in this Section
6.4 will be the sole and exclusive remedies with respect to any
dispute relating to Taxes (other than disputes arising with respect
to Section 2.12 or Section 6.10, the sole and exclusive remedies for
which will be as provided in Section 8.1). Any claims for
indemnification pursuant to this Section 6.4 must be delivered in
writing by the party seeking indemnification to the party from which
indemnification is sought no later than 30 days following the date
of expiration of the statute of limitations applicable to the Tax
for which indemnification is sought.
5. WARN Act. Purchaser and Seller agree that for purposes of the
United States Worker Adjustment and Retraining Notification Act (the "WARN
Act"), the Closing Date shall be the "effective date" as such term is used in
the WARN Act. Purchaser acknowledges and represents that it has no present
intent to engage in a "mass layoff" or "plant closing" with respect to the
Company as defined in the WARN Act. Seller acknowledges and represents that the
Company has not engaged in any "mass layoff" during the two years prior to the
date hereof for which it has not provided advance notice thereof pursuant to the
WARN Act. Purchaser agrees that from and after the Closing Date it shall be
responsible for any notification required under the WARN Act with respect to the
Company and shall indemnify Seller and hold Seller harmless from and against all
fines and other payments which may become due under the WARN Act with respect to
the Company.
6. Supplements to Disclosure Schedule. From time to time prior to
the Closing, Seller and Purchaser will promptly supplement or amend the sections
of the Disclosure Schedule relating to their respective representations and
warranties in this Agreement with respect to any matter, condition or occurrence
hereafter arising which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described in their respective
sections of the Disclosure Schedule. Except with respect to a supplement or
amendment not objected to in writing by the other party within five business
days after receipt thereof, no supplement or amendment by either party shall
have any effect for the purpose of (i) determining satisfaction by Seller of the
conditions set forth in Sections 5.1 and 5.2 hereof or the compliance by Seller
with the covenant set forth in Section 6.1 hereof, (ii) determining satisfaction
by Purchaser of the conditions set forth in Sections 4.1 and 4.2 hereof or (iii)
determining the amount of any indemnification payments under Article VIII
hereof.
7. Covenant to Satisfy Conditions. Each party agrees to use its
reasonable best efforts to insure that the conditions set forth in Article IV
and Article V hereof are satisfied and to consummate the transactions
contemplated hereby, insofar as such matters are within the control of such
party.
30
8. Use of "Gerber" Name. Except for any publication or press release
expressly permitted by Section 9.9, Purchaser agrees and agrees to cause the
Company not to use the "Gerber" name, trademark, tradename or logo at any time
after the Closing Date, except as explicitly provided in the Gerber License.
9. Intercompany Obligations. Immediately prior to the Closing Date,
(i) the Company shall eliminate without recourse, in the form of a return of
capital, all indebtedness of Seller and Seller's Affiliates (other than the
Company and the Subsidiaries) to the Company and the Subsidiaries, other than
indebtedness for goods and services (which services will be consistent with past
practice) provided to Seller or Seller's Affiliates (other than the Company and
the Subsidiaries) by the Company or its Subsidiaries which indebtedness shall
remain outstanding and be paid in a manner consistent with past practice; and
(ii) Seller shall eliminate, in the form of a capital contribution, all
indebtedness of the Company and its Subsidiaries to Seller and its Affiliates
(other than the Company and its Subsidiaries), other than indebtedness for goods
and services (which services will be consistent with past practice) provided to
the Company or its Subsidiaries by Seller or such Affiliates, which indebtedness
shall remain outstanding and be paid pursuant to the terms thereof (i.e., with
respect to goods provided to Seller, margin will be included thereon as
described in the Distributor Agreement).
10. Employment Benefit Provisions.
(a) Purchaser agrees that until December 31, 1996, Purchaser shall cause
the Company and the Subsidiaries to maintain compensation,
incentive, savings, retirement and welfare benefit plans and
programs for the benefit of current employees of the Company (as of
the Closing Date) and the Subsidiaries employed on the Closing Date
which are in the aggregate substantially similar to those provided
to them by Seller, the Company and the Subsidiaries immediately
prior to the Closing Date. All employees of the Company shall be
given credit in determining participation, benefit accrual and
vesting under any benefit plans maintained by the Company, the
Subsidiaries or Purchaser on and after the Closing Date for the
period during which he or she was employed by Seller, its
Affiliates and the Company to the extent that any similar benefit
plan or arrangement of Seller, the Company and the Subsidiaries uses
length of service as a factor in determining participation, benefit
accrual or vesting thereunder.
(b) From and after the Closing Date, the Company shall retain all
liability for any bonus or incentive plan or arrangement (other than
the one-time stay bonus obligations payable on the Closing Date
pursuant to agreements dated March 9, 1995 or March 10, 1995 with
the individuals identified in Section 6.10(b)(1) of the Disclosure
Schedule) with respect to current employees of the Company (as of
the Closing Date) or any of the Subsidiaries entered into or in
effect prior to the
31
Closing Date and disclosed to Purchaser prior to the date hereof. In
addition, the Company shall assume and retain any liability incurred
with respect to any employee benefit plan currently or previously
maintained or contributed to by Seller, the Company or any of the
Subsidiaries for the benefit of current or, except as provided
below, former employees of the Company and the Subsidiaries
(including, but not limited to, the supplemental pension payments to
the persons identified in Item 1 of Section 2.5 of the Disclosure
Schedule), other than any such liability which has been incurred or
will be incurred (i) under the Company's retiree medical plan with
respect to individuals who have retired from the Company or the
Subsidiaries on or before the Closing Date and (ii) under the
Company's long term disability plan (but not medical claims which
are under the Company's health insurance plan) with respect to
employees receiving long term disability benefits as of the Closing
Date or receiving short term disability benefits as of the Closing
Date who be come eligible for long term disability benefits after
the Closing Date without returning to full-time employment with the
Company (the liabilities referred to in clause (i) and (ii) are
collectively referred to as the "Retained Benefits"), which
Retained Benefits shall be assumed and/or retained by Seller from
and after the Closing Date. The aggregate amount of any
contributions made by Seller or the Company to the Hourly Pension
Plan after the date hereof and prior to the Closing Date shall be
reimbursed to Seller in cash at the Closing. The Company and
Purchaser shall also assume and be responsible for, the liabilities
and obligations of Seller for compensation and benefits payable upon
termination of employment following the Closing Date to the
individuals identified in Section 6.10(b)(2) of the Disclosure
Schedule pursuant to agreements between Seller and such individuals
dated March 9, 1995 or March 10, 1995 (the "Severance Obligations")
(i) for the first two such individuals whose employment with the
Company is terminated after the Closing Date, (ii) for the third
such individual whose employment with the Company is terminated
after the Closing Date (the "Third Employee") to the extent the
Severance Obligations with respect to such Third Employee exceed
$250,000 and (iii) for all other such individuals whose employment
with the Company is terminated after the Closing Date. Except as
provided below, Seller will not amend any provision of the severance
and/or stay bonus agreements dated March 9, 1995 or March 10, 1995
between Seller and each of the individuals identified in Section
6.10(b)(1) and (2) of the Disclosure Schedule without the prior
written consent of Purchaser. Seller shall retain and be responsible
for Severance Obligations with respect to the Third Employee up to
a maximum of $250,000. Such Severance Obligations retained by Seller
are referred to herein as the "Seller Severance Obligations." Seller
also shall assume and/or retain liability from and after the Closing
Date for (i) any fines or penalties resulting from the failure of
the Company to make any required pension plan contribution on time,
(ii) claims which are incurred by the
32
Company or any of its Subsidiaries as the result of any employee
pension benefit plan (as defined in Section 3(2) of ERISA) which is
or was maintained or contributed to by Seller or any other member of
the Controlled Group (other than the Company or its Subsidiaries),
and (iii) claims or losses which are or have been or will be
incurred by the Company or on behalf of the Company with respect to
Wyvis Hunt (provided that Purchaser and the Company shall not employ
Wyvis Hunt after the Closing Date without the prior written consent
of Seller) (collectively, the "Retained Obligations to Employees").
Prior to the Closing Date, Seller will either (i) enter into
amendments of each of the Severance Agreements to amend the
definition of "cause" referred to therein to change the references
to Seller in such definition to references to the Company or (ii)
indemnify Purchaser and the Company for Severance Obligations
incurred by them as a result of a termination of employment which
Purchaser or the Company would not have incurred but for the fact
that the amendment referenced to in clause (i) above had not been
made.
11. Ancillary Agreements. On the Closing Date, (i) Seller and the
Company shall enter into a license agreement, substantially in the form of
Exhibit 6.11(i) hereto (the "Gerber License"); (ii) Seller and the Company shall
enter into a transition services agreement, substantially in the form of
Exhibit 6.11(ii) hereto (the "Transition Services Agreement"); and (iii) Seller
shall cause each of Gerber (Canada) Inc. and Seller to enter into, and the
Company shall enter into, a distributor agreement, substantially in the form of
Exhibit 6.11(iii) hereto (the "Distributor Agreement").
12. Covenant Not to Compete. (a) Non-Competition. In consideration
of the mutual covenants and agreements provided for herein, (i) during the
period that the Gerber License is in effect or (ii) in the event that Seller has
been finally judicially determined to have breached its obligations under the
Gerber License in a manner that gives rise to a right of termination on the part
of the Company and the Gerber License is terminated by the Company as a result
of such breach thereof by Seller, for a period of twenty years from the date of
this Agreement (the "Non-Compete Period"), except as expressly permitted by the
terms of the Distributor Agreement for so long as the Distributor Agreement
remains in effect, neither Seller nor any of its Affiliates (other than the
Company and its Subsidiaries) shall engage directly or indirectly in (1) the
Company Business (as defined below) or (2) the manufacture, sale, or
distribution of apparel that would constitute Licensed Articles but for the fact
that such apparel is not sold under any of the Licensed Trade marks (as defined
in the Gerber License) (each of the foregoing collectively referred to herein
as the "Prohibited Businesses"), in each case in the geographic locations where
the Company is licensed to use the Licensed Trademarks pursuant to the Gerber
License and such other geographic areas where, pursuant to Section 1(b)(ii) of
the Gerber License, Seller has agreed to first offer such areas to the Company,
except for those areas that have been offered to the Company pursuant to such
Section 1(b)(ii) and the Company has
33
declined or failed to accept such offer in the period specified therein;
provided, that ownership of less than 5% of the outstanding stock of any
publicly-traded corporation shall not be deemed to be engaging solely by reason
thereof in any of such Prohibited Businesses and Seller or its Affiliates may
acquire any business or enterprise that is engaged in the Prohibited Businesses
if no more than 10% of the consolidated revenues for the immediately preceding
12 months of such business or enterprise are derived from the Prohibited
Businesses and, within eighteen months after such acquisition, Seller or such
Affiliate divests that portion of the acquired business that engages in the
Prohibited Businesses. The "Company Business" consists of the manufacture, sale
and distribution of items constituting "Licensed Articles" as such term is
defined in Section 1(a) of the Gerber License and other activities incident
thereto. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 6.12(a) is invalid or unenforceable,
the parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(b) Non-Solicitation. Seller agrees that, during the three-year period
after the Closing Date (the "Restricted Period"), Seller shall not,
and shall not permit its Affiliates to, directly or indirectly
contact or solicit for the purpose of offering employment to or
hiring (whether as an employee, consultant, agent, independent
contractor or otherwise) or actually hire any person employed by the
Company or any of its Subsidiaries at any time prior to the Closing
Date or during the Restricted Period, without the prior written
consent of the Company.
34
13. Release of Guaranty and Revocation of Powers of Attorney.
(a) Purchaser acknowledges that simultaneously with the Closing or
promptly thereafter, Seller intends to cause Seller's existing
Flammable Fabrics Guaranty to the Consumer Products Safety
Commission to be modified or replaced, such that the existing
guaranty will not, following the Closing, guaranty obligations of or
relating to the Company. Purchaser agrees to cooperate with Seller
in causing Seller to be released from all such obligations, and to
take all reasonable and necessary actions in connection therewith,
including issuing or causing to be issued, a Flammable Fabrics
Guaranty satisfactory to the Consumer Products Safety Commission,
guarantying obligations of or relating to the Company.
(b) Purchaser acknowledges that the Company currently benefits from
certain powers of attorney by Seller in favor of certain agents who
assist Seller in Seller's and the Company's dealings with United
States customs agents. It is agreed and understood by Purchaser that
simultaneously with the Closing or promptly thereafter, Purchaser
shall revoke or modify such powers of attorney to eliminate the
powers granted with respect to the Company.
14. Liabilities Retained by Seller. Seller shall retain and be
responsible for all losses, damages, costs and expenses arising out of all
claims, regardless of when made, against the Company (i) under any workers'
compensation statute, (ii) with respect to accidents caused by vehicles owned or
operated by the Company in Maine, North Carolina, South Carolina and Texas, in
each case referred to in clause (i) or (ii) above, arising solely out of
injuries, actions or omissions occurring subsequent to December 31, 1988 and
prior to the Closing. Seller shall retain the exclusive right to administer and
control the defense of all proceedings and claims that are the subject of this
Section 6.14 and Purchaser and the Company shall have no right to participate
in the defense thereof. Purchaser and the Company agree, to the extent
reasonably requested by Seller, to cooperate with Seller in the defense of all
such proceedings and claims, including providing Seller, its representatives and
counsel with access to the books, records and employees of the Company and
testifying in any proceedings in connection therewith. Seller shall also retain
and be responsible for (i) the fees of Wasserstein Perella & Co., Inc. in
connection with the transactions contemplated hereby and (ii) the excise tax of
$26,000 payable by the Company with respect to the late payment of a
contribution to the Company's defined contribution plan for hourly employees.
All of the liabilities to be retained by Seller pursuant to this Section 6.14
are referred to herein as the "Retained Liabilities."
15. Director and Officer Liability and Indemnification. For a
period of seven years after the Closing, Purchaser shall not permit the Company
or Subsidiary to, amend, repeal or modify any provision in its respective
charter or bylaws relating to the exculpation or indemnification of former
officers and directors (unless required by law), it being the intent of
35
the parties that the officers and directors of the Company and Subsidiary prior
to the Closing shall continue to be entitled to such exculpation and
indemnification to the fullest extent permitted under applicable law.
16. Exclusivity. From and after the date hereof and until this
Agreement is terminated by its terms, none of the Company, any of its
Subsidiaries or Seller shall (and the Company, its Subsidiaries and Seller shall
not cause or permit any Affiliate, director, officer, employee or agent of the
Company, any of its Subsidiaries or their Affiliates to), (a) solicit, initiate
or encourage, directly or indirectly, the submission of any proposal or offer
from any Person (including any of them) relating to any (i) liquidation,
dissolution or recapitalization of, (ii) merger or consolidation with or into,
(iii) acquisition or purchase of assets of or any equity interest in or (iv)
similar transaction or business combination involving the Company or any of its
Subsidiaries (each, a "Significant Transaction") or agree to do any of the
foregoing or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any other Person to do or seek to
do any of the foregoing. Neither the Company nor Seller is presently a party to
any agreement with respect to a Significant Transaction for the sale of the
Company or all or substantially all of its assets other than confidentiality
agreements in effect on the date hereof.
17. Financing. Purchaser shall use its reasonable best efforts to
obtain the maximum amount of Senior Financing available to it [on terms and
conditions reasonably acceptable to Purchaser; such reasonable best efforts will
not require the payment of any fees in excess of those set forth in the
Commitment Letters, the investment of equity in excess of the Equity Investment
(as defined below) or additional debt by the equity holders of Purchaser or any
Affiliate thereof. Prior to the date hereof, Purchaser's equity holders have
delivered to Purchaser the Commitment Letter with respect to Purchaser's equity
financing, which is attached hereto as Exhibit 6.17, providing for an aggregate
commitment of $12,500,000 (the "Equity Investment") to purchase equity
securities of Purchaser. Such Commitment Letter with respect to the Equity
Investment shall not be amended or modified prior to the Closing without the
prior written consent of Seller.
ARTICLE VII
TERMINATION
1. Termination. This Agreement may be terminated and abandoned at
any time prior to the Closing:
(a) by the mutual consent of Seller and Purchaser;
36
(b) by either Seller or Purchaser in the event the Closing has not
occurred on or before February 28, 1996 (the "Cut-Off Date"), unless
the failure of such consummation shall be due to the failure of the
party seeking to terminate this Agreement to comply in all material
respects with the agreements and covenants contained herein to be
performed by such party on or before the Cut-Off Date;
(c) by either Seller or Purchaser in the event any court or governmental
agency of competent jurisdiction shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such
order, decree or ruling or other action shall have become final and
nonappealable; or
(d) by Purchaser or Seller on or before the close of business on
December 17, 1995 if the Board of Directors of Sandoz, Ltd. shall
not have approved this Agreement and the transactions contemplated
hereby.
2. Procedure and Effect of Termination. In the event of the
termination and abandonment of this Agreement by Seller or Purchaser pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same;
(b) All confidential information received by Purchaser or its affiliates
with respect to the business of the Company or Seller or their
subsidiaries shall be treated in accordance with the provisions of
that certain executed Confidentiality Agreement, between EKI
Investments and Seller (the "Confidentiality Agreement"), which
shall survive the termination of this Agreement; and
(c) No party to this Agreement will have any liability under this
Agreement to the other except (i) as stated in subparagraphs (a) and
(b) of this Section 7.2 and (ii) for any breach of any provision of
this Agreement and (iii) as provided in the Confidentiality
Agreement.
ARTICLE VIII
INDEMNIFICATION
37
1. Indemnification. None of the provisions of this Section 8.1 shall
apply to the claims, obligations, liabilities, covenants and representations
regarding Taxes of the Company or Subsidiaries, which shall be governed solely
by the terms of Section 6.4. As between Purchaser, on the one hand, and Seller,
on the other hand, the rights and obligations set forth in this Article VIII,
Sections 6.4, 6.10, 6.11 and 6.14 and in the Confidentiality Agreement will be
the exclusive remedies of the parties hereto with respect to any disputes
relating to this Agreement, the events giving rise to this Agreement and the
transactions provided for herein or contemplated hereby other than an action for
fraud.
(a) Indemnification by Seller. Subject to the limits set forth in this
Section 8.1, Seller agrees to indemnify, defend and hold Purchaser,
its officers, directors, agents and affiliates, harmless from and in
respect of any and all losses, damages, costs and reasonable
expenses (including, without limitation, reasonable expenses of
counsel), in each individual case that exceeds $25,000
(collectively, "Losses") for the full amount of such Losses (subject
to the limitations set forth be low), that they may incur arising
out of or due to (i) any inaccuracy of any representation or the
breach of any warranty of Seller contained in this Agreement or the
Disclosure Schedule, (ii) the breach after the Closing Date by
Seller of any license agreement with a third party to which both
Seller and the Company remain parties after the Closing Date, (iii)
any claims in respect of any physical injury or distress to any
person or physical damage to any property alleged to have occurred
prior to the Closing Date by reason of any alleged defect in any
product sold by the Company which claim is based upon the doctrine
of strict liability in tort or negligence or similar common law tort
theory, (iv) the Retained Benefits, (v) the breach of any covenant
or agreement of Seller contained in this Agreement, (vi) the
Retained Liabilities, (vii) the Retained Obligations to Employees
and (viii) the Seller Severance Obligations. Anything to the
contrary contained herein notwithstanding, none of Purchaser or its
officers, directors, agents or affiliates shall be entitled to
recover from Seller for any claims for indemnity or damages with
respect to any inaccuracy or breach of any representations or
warranties unless and until the total of all such claims in respect
of Losses pursuant to this Section 8.1(a)(i) exceeds $250,000 and
then only for 50% of the amount by which such claims exceed $250,000
but do not exceed $750,000 and then for 100% of the amount by which
such claims exceed $750,000; provided, however, that none of
Purchaser or its officers, directors, agents or affiliates shall be
entitled to recover from Seller more than $30 million in the
aggregate (the "Cap Amount") pursuant to this Section 8.1(a)(i).
(b) Indemnification by Purchaser and the Company. Subject to the limits
set forth in this Section 8.1, Purchaser and the Company jointly and
severally agree to indemnify, defend and hold Seller, its officers,
directors, agents and affiliates,
38
harmless from and in respect of any and all Losses that they may
incur (i) arising out of or due to any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking
or other agreement of Purchaser contained in this Agreement, (ii)
arising out of any and all actions, suits, claims and administrative
or other proceedings of every kind and nature instituted or pending
against Seller or any of its affiliates at any time before or after
the Closing Date to the extent that such Losses (x) relate to or
arise out of or in connection with the assets, businesses,
operations, conduct, products and/or employees (including former
employees and specifically including, without limitation, Purchaser
Severance Obligations) of the Company, whether relating to or
arising out of or in connection with occurrences or omissions before
or after the Closing Date and (y) do not arise out of a breach of
Seller's representations and warranties in, or a default in the
performance of any of Seller's covenants under, this Agreement or do
not represent a Loss with respect to the Note, Retained Liabilities,
Retained Obligations to Employees, Retained Benefits or Seller
Severance Obligations, (iii) arising out of the breach after the
Closing Date by the Company of any license agreement with a third
party to which both Seller and the Company remain parties after the
Closing Date.
(c) Survival of Representations and Warranties. The several
representations and warranties of the parties contained in this
Agreement or in any instrument delivered pursuant hereto will
survive the Closing Date and will remain in full force and effect
thereafter (i) with respect to the representations contained in
Sections 2.1, 2.2, 2.3 and 2.4, indefinitely, (ii) with respect to
the representations contained in Section 2.11, until the expiration
of the applicable statute of limitations, (iii) with respect to the
representations contained in Section 2.16, for a period of five
years after the Closing Date and (iv) with respect to all other
representations and warranties, for a period of 18 months after the
Closing Date; provided, however, that such representations or
warranties shall survive (if at all) beyond such period with respect
to any inaccuracy therein or breach thereof, notice of which shall
have been duly given within such applicable period in accordance
with Section 8.1(d) hereof.
(d) Notice and Opportunity to Defend. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 8.1(a)
or 8.1(b), the party seeking indemnification shall notify the other
party obligated to provide indemnification (the "Indemnifying
Party") promptly. If such event involves (i) any claim or (ii) the
commencement of any action or proceeding by a third person, the
party seeking indemnification will give such Indemnifying Party
prompt written notice of such claim or the commencement of such
action or proceeding; provided, however, that the failure to provide
prompt notice as provided herein will relieve
39
the Indemnifying Party of its obligations hereunder only to the
extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any
party seeking indemnification and it shall notify the Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, may elect, within 20 days of
receiving such notice, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification
(provided that the Indemnifying Party shall only be entitled to
assume the defense of such action (A) to the extent that the action
seeks only money damages the responsibility for which would not be
shared with Purchaser pursuant to Section 8.1(a) and which are not
in excess of the Cap Amount from, and not injunctive or other
equitable relief against, the party seeking indemnification, and (B)
if the Indemnifying Party first acknowledges in writing to the party
seeking indemnification that the party seeking indemnification is
entitled to indemnification under this Section 8.01 with respect to
such matter) and, after notice from the Indemnifying Party to such
party seeking indemnification of such election so to assume the
defense thereof, the Indemnifying Party shall not be liable to the
party seeking indemnification hereunder for any legal expenses of
other counsel or any other expenses subsequently incurred by such
party in connection with the defense thereof. The party seeking
indemnification agrees to cooperate fully with the Indemnifying
Party and its counsel in the defense against any such action or
asserted liability. The party seeking indemnification shall have the
right to participate at its own expense in the defense of such
action or asserted liability. In no event shall an Indemnifying
Party be liable for any settlement effected without its consent,
which consent shall not be unreasonably withheld. In no event shall
a party seeking indemnification be liable for any settlement
effected without its consent, which consent shall not be
unreasonably withheld, unless such settlement does not contain any
terms or conditions that are adverse to the interests of the party
seeking indemnification.
(e) Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of any other party
(hereinafter referred to as an "Indemnitee") pursuant to this
Section 8.1 shall be adjusted (including, without limitation,
retroactively) (i) by any insurance proceeds actually recovered by
or on behalf of such Indemnitee in reduction of the related
indemnifiable loss (the "Indemnifiable Loss") and (ii) (A) reduced
by the present value of the amount of any Tax savings resulting from
any tax benefit to the party seeking indemnification (or, when such
party is Purchaser, the Company) as a result of the Indemnifiable
Loss, and (B) increased by the present value of the amount of any
Tax due with respect to the indemnification payment itself. Amounts
required to be paid, as so adjusted, are hereafter sometimes called
an "Indemnity Payment."
40
If an Indemnitee shall have received or shall have had paid on its
behalf an Indemnity Payment in respect of an Indemnifiable Loss and
shall subsequently receive insurance proceeds in respect of such
Indemnifiable Loss, or realize any net tax benefit (as computed in
clause (ii) above) as a result of such Indemnifiable Loss, then the
Indemnitee shall pay to the Indemnifying Party the amount of such
insurance proceeds or net tax benefit or, if lesser, the amount of
the Indemnity Payment.
2. Environmental Indemnification. Seller agrees to indemnify,
defend, and hold harmless Purchaser, its officers, directors, agents, and
affiliates from and in respect of any and all losses, damages, costs, and
reasonable expenses (including, without limitation, cleanup costs, removal
costs, and reasonable expenses of counsel), that they may incur arising under
applicable Environmental Laws out of or due to (i) the ownership, operation, use
or lease of any property or facility, other than those properties or facilities
set forth on Section 2.18 of the Disclosure Schedule, by the Company or any of
its predecessors or any of the Subsidiaries; (ii) the presence, on or prior to
the Closing Date, of stained soil or pavement at and around oil tanks, oil tank
piping, and air compressor blow down pipes at the three facilities operated by
the Company in the Dominican Republic; (iii) the exposure, on or prior to the
Closing Date, of employees or other persons to cotton dust at any facility owned
or operated by the Company or any of its predecessors or any of the
Subsidiaries; and (iv) 25% of the total out of pocket cost to Purchaser and the
Company of any removal of lead paint at the Upper Pelzer, South Carolina and
Lower Pelzer, South Carolina facilities that is peeling or damaged as of the
Closing Date (it being understood that, notwithstanding anything to the contrary
contained herein, Purchaser and the Company shall retain responsibility for 75%
of such cost). The environmental indemnification set forth in this Section 8.2
is not subject to the $25,000 threshold amount contained in the definition of
"Losses" in Section 8.1(a), the provisions of the last sentence of Section
8.1(a) or the Cap Amount. Purchaser and the Company shall (A) consult with
Seller with respect to any proposed investigatory, remedial or corrective action
for which Seller would be obligated to indemnify Purchaser pursuant to this
Section 8.2 and (B) so long as Seller acknowledges in writing that Purchaser is
entitled to indemnification pursuant to this Section 8.2 with respect to the
matters for which any investigatory, remedial or corrective action is proposed
to be taken, Purchaser and the Company shall not take any such action or incur
any costs with respect thereto without the prior written consent of Seller, such
consent not to be unreasonably withheld or delayed (provided that Purchaser and
the Company may take such action and incur such costs without Seller's prior
written consent to respond to any exigent circumstances that reasonably requires
the Company to act immediately to remedy or prevent a violation of, or to comply
with any obligation under, Environmental Laws, it being understood that
Purchaser and the Company shall at all times act in good faith to give effect to
the provisions of this Section 8.2 to the fullest extent possible consistent
with the constraints imposed by such exigent circumstances).
41
ARTICLE IX
MISCELLANEOUS
1. Fees and Expenses. Seller (and not the Company) shall bear its
own expenses and Purchaser shall bear its own expenses in connection with the
negotiation and consummation of the transactions contemplated by this Agreement.
Each of Seller and Purchaser shall bear the fees and expenses of any broker or
finder retained by such party in connection with the transactions contemplated
herein. Seller and Purchaser shall share equally the reasonable fees and
expenses of one counsel for the management of the Company in connection with
negotiating arrangements relating to their equity arrangements after the Closing
up to a maximum of $50,000 in the aggregate.
2. Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflicts of
laws provisions thereof.
3. Amendment. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by the party hereto.
4. No Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other party hereto; provided that Purchaser may
assign its rights and obligations under this Agreement (i) to any one of its
Affiliates without obtaining such consent, (ii) for collateral security purposes
to any lenders providing financing to Purchaser, the Company or any of their
Affiliates or Subsidiaries, and any such lender may exercise all of the rights
and remedies of Purchaser hereunder, and (iii) following the Closing, in
connection with any sale of all or substantially all of the assets, capital
stock or business of Purchaser or the Company, provided further, that, in the
case of clauses (i), (ii) and (iii) above, Purchaser shall not be released from
any of its obligations hereunder.
5. Waiver. Any of the terms or conditions of this Agreement which
may be lawfully waived may be waived in writing at any time by each party which
is entitled to the benefits thereof. Any waiver of any of the provisions of this
Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
42
6. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by delivery, by
telex, telecopier, overnight courier or by mail (registered or certified mail,
postage prepaid, return receipt requested) to the respective parties as
follows:
If to Purchaser:
Gerber Childrenswear, Inc.
531 Main Street
Greenville, SC 29602
Attention: President
(803) 240-5977 (telecopier)
(803) 240-2840 (telephone)
with a copy to:
Citicorp Venture Capital, Ltd
399 Park Avenue
14th Floor, Zone 4
New York, New York 10022
Attention: John Weber
(212) 888-2940 (telecopier)
(212) 559-1127 (telephone)
and a copy to:
GCIH, Inc.
1333 Broadway
7th Floor
New York, New York 10018
Attention: Chairman
(212) 268-7364 (telecopier)
(212) 268-5100 (telephone)
43
and a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, N.Y. 10022
Attention: Kirk A. Radke, Esq.
(212) 446-4900 (telecopier)
(212) 446-4940 (telephone)
If to Seller:
Gerber Products Company
445 State Street
Fremont, Michigan 49412
Attention: General Counsel
(616) 928-2331 (telecopier)
(616) 928-2000 (telephone)
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
Attention: William R. Kunkel, Esq.
(312) 407-0411 (telecopier)
(312) 407-0700 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
7. Complete Agreement. This Agreement, the Confidentiality
Agreement and the other documents and writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and thereof. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
8. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
44
9. Publicity. Seller and Purchaser will consult with each other and
will mutually agree upon any publication or press release of any nature with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such publication or press release prior to such consultation and
agreement except as may be required by applicable law or by obligations pursuant
to any listing agreement with any securities exchange or any securities exchange
regulation, in which case the party proposing to issue such publication or press
release shall use reasonable efforts to consult in good faith with the other
party before issuing any such publication or press release.
10. Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
11. Knowledge. For purposes of this Agreement, the term "knowledge"
means, with respect to Purchaser, the actual knowledge of any senior executive
officer of Purchaser and, with respect to Seller, the actual knowledge of any
senior corporate executive officer of Seller.
12. Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
13. Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
14. Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court having jurisdiction over the parties and the matter, in addition to any
other remedy to which they may be entitled, at law or in equity, and that such
injunction shall be available without the parties bringing suit being required
to post any bond or undertaking.
45
15. Dispute Resolution.
(a) Arbitration. In the event of disputes between the parties with
respect to the terms and conditions of this Agreement, such disputes
shall be resolved by and through an arbitration proceeding to be
conducted under the auspices of the American Arbitration Association
(the "AAA") in New York, New York pursuant to the AAA's Commercial
Arbitration Rules. Such arbitration proceeding shall be conducted in
as expedited a manner as is then permitted by those rules. The
arbitrator or arbitrators in any such arbitration (an "Arbitration")
shall be persons who are expert in the subject matter of the
dispute. Both the foregoing agreement of the parties to arbitrate
any and all such claims, and the results, determination, finding,
judgment and/or award rendered through such Arbitration, shall be
final and binding on the parties thereto and may be specifically
enforced by legal proceedings.
(b) Selection of Arbitrators. Seller shall appoint one (1) arbitrator,
and Purchaser one (1) arbitrator within a term of thirty (30)
calendar days from the date of any claim hereunder, and the two (2)
arbitrators so appointed shall appoint the third arbitrator, within
a term of thirty (30) calendar days from the date in which the last
of the two (2) arbitrators have been selected.
If either Seller or Purchaser fails to select its arbitrator within
the term mentioned above, or in the event that the two (2) selected arbitrators
are unable or unwilling to select a third arbitrator within fourteen (14)
calendar days following the selection of the last of them, then AAA shall select
the arbitrator that was not selected by either of Seller or Purchaser or the
third arbitrator as the case may be, in accordance with the procedure set forth
below, and the three (3) arbitrators shall constitute the arbitration panel for
purposes of the dispute.
(c) Procedure. Each party shall bear separately the cost of their
respective attorneys, witnesses and experts in connection with such
arbitration. Time is of the essence in this arbitration procedure,
and the arbitrators shall be instructed and required to render their
decision within ten (10) days following completion of the
Arbitration.
(d) Exclusive Remedy. Any and all legal proceedings to enforce this
Agreement (except for any action to compel arbitration hereunder,
any action to enforce any award or judgment rendered thereby, any
dispute resolution pursuant to Section 1.4 hereof or any action for
specific performance under Section 9.14), shall be governed in
accordance with this Section 9.15.
16. Confidentiality of Company Information. It is under stood that
Seller may have confidential information concerning the Company which, if known
to competitors thereof,
46
may damage the Company. Seller agrees that from and after the Closing Date,
Seller will not divulge to any third party any confidential information obtained
by Seller concerning the Company, including but not limited to customer and
supplier lists, marketing strategy, specifications, product information, sales
data, trade secrets and business information. The foregoing obligations shall
not apply to information which: (a) is or becomes part of the public domain
other than through breach of this Agreement by Seller, (b) is or becomes
available to Seller from any unaffiliated source which has no obligation of
confidentiality to Purchaser; or (c) is required to be disclosed by law or
governmental order (but only to the extent so required).
IN WITNESS WHEREOF, each of Purchaser and Seller have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
GERBER PRODUCTS COMPANY
By
---------------------
Name:
Title:
GCIH, INC.
By
---------------------
Name:
Title:
Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘S-1’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 3/4/98 | | | | | | | None on these Dates |
| | 12/31/96 | | 35 |
| | 2/28/96 | | 41 |
| | 1/31/96 | | 6 |
| | 1/19/96 | | 6 |
| | 1/12/96 | | 5 |
| | 12/17/95 | | 41 |
| | 12/14/95 | | 1 | | 5 |
| | 12/2/95 | | 10 |
| | 11/30/95 | | 10 | | 27 |
| | 10/28/95 | | 12 |
| | 3/10/95 | | 35 | | 36 |
| | 3/9/95 | | 35 | | 36 |
| | 1/1/93 | | 19 | | 20 |
| | 2/12/92 | | 33 |
| List all Filings |
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